Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions, except per share data)
			Quarter ended												Year to date
Revenues			9/30/2024						9/30/2023						9/30/2024						9/30/2023
Company sales			$	621					$	510					$	1,667					$	1,495
Franchise and property revenues			804						796						2,350						2,351
Franchise contributions for advertising and other services			401						402						1,170						1,194
Total revenues			1,826						1,708						5,187						5,040
Costs and Expenses, Net
Company restaurant expenses			523						421						1,393						1,239
General and administrative expenses			263						267						830						840
Franchise and property expenses			36						27						90						95
Franchise advertising and other services expense			401						400						1,169						1,183
Refranchising (gain) loss			(12)						(19)						(31)						(40)
Other (income) expense			(4)						(1)						(10)						14
Total costs and expenses, net			1,207						1,095						3,441						3,331
Operating Profit			619						613						1,746						1,709
Investment (income) expense, net			(1)						(16)						21						(21)
Other pension (income) expense			(2)						(2)						(5)						(5)
Interest expense, net			120						126						358						381
Income Before Income Taxes			502						505						1,372						1,354
Income tax provision			120						89						309						220
Net Income			$	382					$	416					$	1,063					$	1,134
Basic Earnings Per Common Share			$	1.36					$	1.48					$	3.77					$	4.03
Diluted Earnings Per Common Share			$	1.35					$	1.46					$	3.73					$	3.97
Dividends Declared Per Common Share			$	0.67					$	0.605					$	2.01					$	1.815
See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
			Quarter ended												Year to date
			9/30/2024						9/30/2023						9/30/2024						9/30/2023
Net Income			$	382					$	416					$	1,063					$	1,134
Other comprehensive income, 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			34						(20)						26						(8)
Reclassification of adjustments and (gains) losses into Net Income			—						—						—						60
			34						(20)						26						52
Tax (expense) benefit			—						—						—						—
			34						(20)						26						52
Changes in pension and post-retirement benefits
Unrealized gains (losses) arising during the period			—						—						—						—
Reclassification of (gains) losses into Net Income			—						—						1						1
			—						—						1						1
Tax (expense) benefit			—						—						—						(2)
			—						—						1						(1)
Changes in derivative instruments
Unrealized gains (losses) arising during the period			(4)						7						12						25
Reclassification of (gains) losses into Net Income			(9)						(9)						(25)						(20)
			(13)						(2)						(13)						5
Tax (expense) benefit			3						1						3						(1)
			(10)						(1)						(10)						4
Other comprehensive income (loss), net of tax			24						(21)						17						55
Comprehensive Income			$	406					$	395					$	1,080					$	1,189
See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
			Year to date
			9/30/2024						9/30/2023
Cash Flows – Operating Activities
Net Income			$	1,063					$	1,134
Depreciation and amortization			120						104
Refranchising (gain) loss			(31)						(40)
Investment (income) expense, net			21						(21)
Deferred income taxes			5						(93)
Share-based compensation expense			52						69
Changes in accounts and notes receivable			28						(13)
Changes in prepaid expenses and other current assets			(21)						(16)
Changes in accounts payable and other current liabilities			(46)						(52)
Changes in income taxes payable			(67)						(4)
Other, net			52						87
Net Cash Provided by Operating Activities			1,176						1,155
Cash Flows – Investing Activities
Capital spending			(151)						(179)
Proceeds from sale of Devyani Investment			104						—
Proceeds from sale of KFC Russia			—						121
Acquisition of KFC U.K. and Ireland restaurants			(174)						—
Proceeds from refranchising of restaurants			48						57
Maturities (purchases) of Short term investments, net			(91)						—
Other, net			(28)						(3)
Net Cash Used in Investing Activities			(292)						(4)
Cash Flows – Financing Activities
Proceeds from long-term debt			237						—
Repayments of long-term debt			(472)						(60)
Revolving credit facility, three months or less, net			205						(279)
Repurchase shares of Common Stock			(327)						(50)
Dividends paid on Common Stock			(565)						(508)
Other, net			(69)						(24)
Net Cash Used in Financing Activities			(991)						(921)
Effect of Exchange Rates on Cash and Cash Equivalents			10						(2)
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents			(97)						228
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period			724						647
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period			$	627					$	875
See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
			9/30/2024						12/31/2023
ASSETS
Current Assets
Cash and cash equivalents			$	457					$	512
Accounts and notes receivable, net			708						737
Prepaid expenses and other current assets			460						360
Total Current Assets			1,625						1,609
Property, plant and equipment, net			1,300						1,197
Goodwill			735						642
Intangible assets, net			416						377
Other assets			1,352						1,361
Deferred income taxes			1,033						1,045
Total Assets			$	6,461					$	6,231
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and other current liabilities			$	1,138					$	1,169
Income taxes payable			24						55
Short-term borrowings			24						53
Total Current Liabilities			1,186						1,277
Long-term debt			11,169						11,142
Other liabilities and deferred credits			1,780						1,670
Total Liabilities			14,135						14,089
Shareholders’ Deficit
Common Stock, no par value, 750 shares authorized; 280 shares issued in 2024 and 281 shares issued in 2023			—						60
Accumulated deficit			(7,389)						(7,616)
Accumulated other comprehensive loss			(285)						(302)
Total Shareholders’ Deficit			(7,674)						(7,858)
Total Liabilities and Shareholders’ Deficit			$	6,461					$	6,231
See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
Quarters and years to date ended September 30, 2024 and 2023
(in millions)
						Yum! Brands, Inc.
						Issued Common Stock												Accumulated Deficit						Accumulated Other Comprehensive Loss						Total Shareholders' Deficit
						Shares						Amount
Balance at June 30, 2024						281						$	—					$	(7,321)					$	(309)					$	(7,630)
Net Income																		382												382
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature																								34						34
Pension and post-retirement benefit plans																								—						—
Net loss on derivative instruments (net of tax impact of $3 million)																								(10)						(10)
Comprehensive Income																														406
Dividends declared																		(188)												(188)
Repurchase of shares of Common Stock						(2)						(15)						(262)												(277)
Employee share-based award exercises						1						—																		—
Share-based compensation events												15																		15
Balance at September 30, 2024						280						$	—					$	(7,389)					$	(285)					$	(7,674)
Balance at December 31, 2023						281						$	60					$	(7,616)					$	(302)					$	(7,858)
Net Income																		1,063												1,063
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature																								26						26
Pension and post-retirement benefit plans																								1						1
Net loss on derivative instruments (net of tax impact of $3 million)																								(10)						(10)
Comprehensive Income																														1,080
Dividends declared																		(568)												(568)
Repurchase of shares of Common Stock						(2)						(59)						(268)												(327)
Employee share-based award exercises						1						(66)																		(66)
Share-based compensation events												65																		65
Balance at September 30, 2024						280						$	—					$	(7,389)					$	(285)					$	(7,674)
Balance at June 30, 2023						280						$	13					$	(8,156)					$	(293)					$	(8,436)
Net Income																		416												416
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature																								(20)						(20)
Reclassification of translation adjustments into income																								—						—
Pension and post-retirement benefit plans																								—						—
Net loss on derivative instruments (net of tax impact of $1 million)																								(1)						(1)
Comprehensive Income																														395
Dividends declared																		(169)												(169)
Employee share-based award exercises						—						(4)																		(4)
Share-based compensation events												24																		24
Balance at September 30, 2023						280						$	33					$	(7,909)					$	(314)					$	(8,190)
Balance at December 31, 2022						280						$	—					$	(8,507)					$	(369)					$	(8,876)
Net Income																		1,134												1,134
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature																								(8)						(8)
Reclassification of translation adjustments into income																								60						60
Pension and post-retirement benefit plans (net of tax impact of $2 million)																								(1)						(1)
Net gain on derivative instruments (net of tax impact of $1 million)																								4						4
Comprehensive Income																														1,189
Dividends declared																		(510)												(510)
Repurchase of shares of Common Stock						—						(24)						(26)												(50)
Employee share-based award exercises						—						(24)																		(24)
Share-based compensation events												81																		81
Balance at September 30, 2023						280						$	33					$	(7,909)					$	(314)					$	(8,190)
See accompanying Notes to Condensed Consolidated Financial Statements.

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, 2023 (“2023 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 60,000 restaurants in more than 155 countries and territories. As of September 30, 2024, 98% 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-style and pizza categories, respectively. The Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

As of September 30, 2024, 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

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. For subsidiaries that operate on this periodic weekly calendar, 2024 will include a 53rd week. 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 2023 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.

Note 2 - KFC United Kingdom ("U.K.") and Ireland Restaurant Acquisition

On April 29, 2024, we completed the acquisition of all of the issued shares of two franchisee entities that owned 216 KFC restaurants in the U.K. and Ireland. The acquisition creates a significant opportunity to accelerate KFC's growth strategy in the large and growing U.K. and Ireland chicken market. The purchase price to be allocated for accounting purposes of $171 million consisted of cash, net of cash acquired, in the amount of $174 million offset by the settlement of a liability of $3 million related to our preexisting contractual relationship with the franchisee.

The acquisition was accounted for as a business combination using the acquisition method of accounting. The preliminary allocation of the purchase price is based on management's analysis, including preliminary work performed by third party valuation specialists, as of April 29, 2024.

During the quarter ended September 30, 2024, we adjusted our preliminary estimate of the fair value of net assets acquired. The components of the preliminary purchase price allocation, subsequent to the adjustments to the allocation in the quarter ended September 30, 2024, were as follows:

Total Current Assets						$	2
Property, plant and equipment, net						85
Reacquired franchise rights (included in Intangible assets, net)						47
Operating lease right-of-use assets (included in Other assets)						109
Total Identifiable Assets						243
Total Current Liabilities						(18)
Operating lease liabilities (included in Other liabilities and deferred credits)						(102)
Other liabilities						(31)
Total Liabilities Assumed						(151)
Total identifiable net assets						92
Goodwill						79
Purchase price to be allocated						$	171

The adjustments to the preliminary estimate of identifiable net assets acquired as recorded on June 30, 2024 resulted in a corresponding $3 million increase in estimated goodwill due to the following changes to the preliminary purchase price allocation.

						Increase (Decrease) in Goodwill
Decrease in Property, plant and equipment, net						$	3
Total increase in Goodwill						$	3

We will continue to obtain information to assist in determining the fair value of net assets acquired during the remaining measurement period.

Reacquired franchise rights, which were valued based on after-royalty cash flows expected to be earned by the acquired restaurants over the remaining term of their then-existing franchise agreements, have an estimated weighted average useful life of 5 years. The excess of the purchase price over the preliminary 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 expected to be partially deductible for income tax purposes and has been allocated to our KFC U.K. reporting unit.

The financial results of the acquired restaurants have been included in our Condensed Consolidated Financial Statements since the date of the acquisition but did not significantly impact our results for the quarter or year to date ended September 30, 2024. The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2023 would not have been material. The direct transaction costs associated with the acquisition were also not material and were expensed as incurred.

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

						Quarter ended												Year to date
						2024						2023						2024						2023
Net Income						$	382					$	416					$	1,063					$	1,134
Weighted-average common shares outstanding (for basic calculation)						282						281						282						281
Effect of dilutive share-based employee compensation						3						5						3						5
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)						285						286						285						286
Basic EPS						$	1.36					$	1.48					$	3.77					$	4.03
Diluted EPS						$	1.35					$	1.46					$	3.73					$	3.97
Unexercised employee SARs, RSUs, PSUs and stock options (in millions) excluded from the diluted EPS computation(a)						1.7						1.7						1.8						1.7

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

Note 4 - Shareholders' Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended September 30, 2024 and 2023 as indicated below. All amounts exclude applicable transaction fees.

						Shares Repurchased (thousands)																					Dollar Value of Shares Repurchased																					Remaining Dollar Value of Shares that may be Repurchased
Authorization Date						2024									2023												2024									2023												2024
September 2022						366									387												$	50								$	50											$	—
May 2024						2,068									—												277									—												1,723
Total						2,434									387												$	327								$	50											$	1,723

In May 2024, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees) 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 September 30, 2024, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under the May 2024 authorization.

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

						Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature						Pension and Post-Retirement Benefits						Derivative Instruments						Total
Balance at June 30, 2024, net of tax						$	(209)					$	(103)					$	3					$	(309)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax						34						—						(3)						31
(Gains) losses reclassified from AOCI, net of tax						—						—						(7)						(7)
						34						—						(10)						24
Balance at September 30, 2024, net of tax						$	(175)					$	(103)					$	(7)					$	(285)
Balance at December 31, 2023, net of tax						$	(201)					$	(104)					$	3					$	(302)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax						26						—						9						35
(Gains) losses reclassified from AOCI, net of tax						—						1						(19)						(18)
						26						1						(10)						17
Balance at September 30, 2024, net of tax						$	(175)					$	(103)					$	(7)					$	(285)

Note 5 - Other (Income) Expense

						Quarter ended												Year to date
						9/30/2024						9/30/2023						9/30/2024						9/30/2023
Foreign exchange net (gain) loss						$	(3)					$	4					$	2					$	8
Impairment and closure expense						2						1						2						2
Other						(3)						(6)						(14)						4
Other (income) expense						$	(4)					$	(1)					$	(10)					$	14

Note 6 - 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.

			9/30/2024						12/31/2023
Accounts and notes receivable, gross			$	762					$	776
Allowance for doubtful accounts			(54)						(39)
Accounts and notes receivable, net			$	708					$	737

Prepaid Expenses and Other Current Assets

			9/30/2024						12/31/2023
Income tax receivable			$	55					$	20
Restricted cash			135						177
Short term investments			91						—
Other prepaid expenses and current assets			179						163
Prepaid expenses and other current assets			$	460					$	360

Property, Plant and Equipment, net

			9/30/2024						12/31/2023
Property, plant and equipment, gross			$	2,694					$	2,529
Accumulated depreciation and amortization			(1,394)						(1,332)
Property, plant and equipment, net			$	1,300					$	1,197

Other Assets			9/30/2024						12/31/2023
Operating lease right-of-use assets(a)			$	890					$	764
Franchise incentives			166						175
Investment in Devyani International Limited (See Note 13)			—						124
Other			296						298
Other assets			$	1,352					$	1,361

(a) Non-current operating lease liabilities of $868 million and $757 million as of September 30, 2024 and December 31, 2023, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

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

			9/30/2024						12/31/2023
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets			$	457					$	512
Restricted cash included in Prepaid expenses and other current assets(a)			135						177
Restricted cash and restricted cash equivalents included in Other assets(b)			35						35
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows			$	627					$	724

(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 7 - Income Taxes

			Quarter ended												Year to date
			2024						2023						2024						2023
Income tax provision			$	120					$	89					$	309					$	220
Effective tax rate			23.8		%				17.7		%				22.5		%				16.3		%

Our estimated effective tax rate on income for the full fiscal year is expected to be higher than the U.S. federal statutory rate of 21%, primarily due to state income taxes and U.S. taxes on foreign earnings partially offset by taxes on income earned in foreign jurisdictions with statutory tax rates below 21%.

Our third quarter and year to date effective tax rate is higher than the prior year primarily due to higher taxes paid in foreign jurisdictions where our intellectual property rights are domiciled, higher U.S. current tax expense on foreign earnings, and tax expense recognized in the quarter ended September 30, 2024 as compared to tax benefit recognized in the quarter ended September 30, 2023 associated with adjustments related to prior year taxes. In addition, our year to date effective tax rate is higher than the prior year due to the lapping of higher foreign tax benefits associated with the favorable resolutions of tax audits and the establishment of additional net operating loss carryforward deferred tax assets in foreign jurisdictions in the quarter ended June 30, 2023.

Note 8 - 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.

			Quarter ended 9/30/2024
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger & Grill Division						Total
U.S.
Company sales						$	17					$	267					$	1					$	133					$	418
Franchise revenues						44						211						66						2						323
Property revenues						4						8						1						1						14
Franchise contributions for advertising and other services						10						161						71						1						243
China
Franchise revenues						70						—						17						—						87
Other
Company sales						203						—						—						—						203
Franchise revenues						288						15						66						—						369
Property revenues						11						—						—						—						11
Franchise contributions for advertising and other services						138						4						16						—						158
						$	785					$	666					$	238					$	137					$	1,826

						Quarter ended 9/30/2023
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger & Grill Division						Total
U.S.
Company sales						$	15					$	256					$	2					$	135					$	408
Franchise revenues						48						196						64						1						309
Property revenues						4						9						1						1						15
Franchise contributions for advertising and other services						9						152						72						—						233
China
Franchise revenues						66						—						18						—						84
Other
Company sales						102						—						—						—						102
Franchise revenues						296						13						67						—						376
Property revenues						12						—						—						—						12
Franchise contributions for advertising and other services						148						3						18						—						169
						$	700					$	629					$	242					$	137					$	1,708

			Year to date 9/30/2024
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger & Grill Division						Total
U.S.
Company sales						$	45					$	775					$	5					$	399					$	1,224
Franchise revenues						134						608						200						5						947
Property revenues						10						27						3						2						42
Franchise contributions for advertising and other services						30						468						217						2						717
China
Franchise revenues						200						—						51						—						251
Other
Company sales						443						—						—						—						443
Franchise revenues						842						43						191						—						1,076
Property revenues						33						—						1						—						34
Franchise contributions for advertising and other services						397						9						47						—						453
						$	2,134					$	1,930					$	715					$	408					$	5,187

			Year to date 9/30/2023
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger & Grill Division						Total
U.S.
Company sales						$	48					$	738					$	11					$	404					$	1,201
Franchise revenues						143						568						200						4						915
Property revenues						10						29						3						2						44
Franchise contributions for advertising and other services						25						440						224						1						690
China
Franchise revenues						193						—						52						—						245
Other
Company sales						294						—						—						—						294
Franchise revenues						870						40						198						—						1,108
Property revenues						38						—						1						—						39
Franchise contributions for advertising and other services						448						7						49						—						504
						$	2,069					$	1,822					$	738					$	411					$	5,040

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 2024 is presented below.

						Deferred Franchise Fees
Balance at December 31, 2023						$	444
Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period						(63)
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period						49
Other(a)						(1)
Balance at September 30, 2024						$	429

(a) Primarily includes the settlement of a preexisting contractual relationship related to the KFC U.K. and Ireland restaurant acquisition (see Note 2) and 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			$	72
1 - 2 years			65
2 - 3 years			58
3 - 4 years			51
4 - 5 years			43
Thereafter			140
Total			$	429

Note 9 - Reportable Operating Segments

We identify our operating segments based on management responsibility. The following tables summarize Revenues and Operating Profit for each of our reportable operating segments:

			Quarter ended												Year to date
Revenues			2024						2023						2024						2023
KFC Division			$	785					$	700					$	2,134					$	2,069
Taco Bell Division			666						629						1,930						1,822
Pizza Hut Division			238						242						715						738
Habit Burger & Grill Division			137						137						408						411
			$	1,826					$	1,708					$	5,187					$	5,040

			Quarter ended												Year to date
Operating Profit			2024						2023						2024						2023
KFC Division			$	339					$	344					$	986					$	975
Taco Bell Division			251						226						709						658
Pizza Hut Division			91						97						278						292
Habit Burger & Grill Division			1						(2)						(2)						(4)
Corporate and unallocated G&A expenses			(74)						(68)						(249)						(238)
Unallocated Company restaurant expenses(a)			(3)						—						(4)						—
Unallocated Franchise and property income (expenses)			—						1						—						(1)
Unallocated Refranchising gain (loss)			12						19						31						40
Unallocated Other income (expense)			2						(4)						(3)						(13)
Operating Profit			$	619					$	613					$	1,746					$	1,709
Investment income (expense), net(b)			1						16						(21)						21
Other pension income (expense)			2						2						5						5
Interest expense, net			(120)						(126)						(358)						(381)
Income before income taxes			$	502					$	505					$	1,372					$	1,354

Our chief operating decision maker (“CODM”) does not consider the impact of Corporate and unallocated amounts when assessing Divisional segment performance. As such, we do not allocate such amounts to our Divisional segments for performance reporting purposes.

(a)Unallocated Company restaurant expenses include amortization of reacquired franchise rights (see Note 2).

(b)Includes changes in the value of our investment in Devyani International Limited (see Note 13).

Note 10 - 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
			2024						2023						2024						2023
Service cost			$	1					$	1					$	3					$	3
Interest cost			10						10						31						31
Expected return on plan assets			(12)						(12)						(38)						(37)
Amortization of net (gain) / loss			—						—						1						(1)
Amortization of prior service cost			—						—						1						1
Net periodic benefit cost (income)			$	(1)					$	(1)					$	(2)					$	(3)

Note 11 - Short-term Borrowings and Long-term Debt

Short-term Borrowings						9/30/2024						12/31/2023
Current maturities of long-term debt						$	26					$	56
Less current portion of debt issuance costs and discounts						(2)						(3)
Short-term borrowings						$	24					$	53
Long-term Debt
Securitization Notes						$	3,743					$	3,743
Subsidiary Senior Unsecured Notes						750						750
Revolving Facility						210						—
Term Loan A Facility						500						717
Term Loan B Facility						1,448						1,459
YUM Senior Unsecured Notes						4,550						4,550
Finance lease obligations						67						50
						$	11,268					$	11,269
Less long-term portion of debt issuance costs and discounts						(73)						(71)
Less current maturities of long-term debt						(26)						(56)
Long-term debt						$	11,169					$	11,142

Details of our Short-term borrowings and Long-term debt as of December 31, 2023 can be found within our 2023 Form 10-K.

On April 26, 2024, KFC Holding Co, Pizza Hut Holdings, LLC and Taco Bell of America, LLC (collectively, the "Borrowers"), each of which is a wholly-owned subsidiary of the Company, completed the refinancing of the then outstanding $713 million under the term loan A facility and $1.25 billion capacity under the revolving facility through the issuance of a new $500 million term loan A facility (the "Term Loan A Facility") and a $1.5 billion revolving facility (the "Revolving Facility") pursuant to an amendment to the Credit Agreement (as defined in our 2023 Form 10-K). The transaction did not add any additional net new debt to the Company's Balance Sheet. 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 Borrowers' 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 Borrowers' existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remains outstanding as of such date. The amendment also removed the excess cash flow mandatory prepayment requirement with respect to the Term Loan A Facility.

The refinanced Term Loan A Facility is subject to quarterly amortization payments in an amount equal to 0.625% of the principal amount of the facility as of the refinance date now beginning with the third quarter of 2025. The Term Loan A Facility quarterly amortization payments increase to 1.25% of the principal amount of the facility as of the refinance date beginning with the third quarter of 2027. All other material provisions of the Credit Agreement remain unchanged.

As a result of this refinancing, $8 million of fees were capitalized as debt issuance costs, $6 million of which were paid directly to lenders. During the year to date ended September 30, 2024, previously recorded unamortized debt issuance costs of

$1 million were written off and recognized within Interest expense, net due to this refinancing.

Cash paid for interest during the year to date ended September 30, 2024 and 2023, was $356 million and $367 million, respectively.

Note 12 - Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in interest rates, equity prices and foreign currency exchange rates. Our use of foreign currency contracts to manage foreign currency exchange rates associated with certain foreign currency denominated intercompany receivables and payables is currently not significant.

Interest Rate Swaps

We have entered into interest rate swaps, with the objective of reducing our exposure to interest rate risk for a portion of our variable-rate debt interest payments primarily under our Term Loan B Facility. At both September 30, 2024 and December 31, 2023, we had interest rate swaps expiring in March 2025 with notional amounts of $1.5 billion. These interest rate swaps have been designated cash flow hedges as the changes in the future cash flows of the swaps are expected to offset changes in expected future interest payments on the related variable-rate debt. There were no other interest rate swaps outstanding as of September 30, 2024 or December 31, 2023.

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. Through September 30, 2024, the swaps were highly effective cash flow hedges.

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
			2024						2023						2024						2023						2024						2023						2024						2023
Interest rate swaps			$	(5)					$	6					$	(9)					$	(8)					$	9					$	23					$	(26)					$	(20)
Income tax benefit/(expense)			1						(1)						2						2						(3)						(6)						6						5

As of September 30, 2024, the estimated net gain included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is $9 million, based on current Secured Overnight Financing Rate ("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 September 30, 2024 and December 31, 2023, was not significant.

As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties will fail to meet their contractual obligations. 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 September 30, 2024, 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.

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

Note 13 - Fair Value Disclosures

As of September 30, 2024, the carrying values of cash and cash equivalents, restricted cash, short-term investments, 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:

			9/30/2024												12/31/2023
			Carrying Value						Fair Value (Level 2)						Carrying Value						Fair Value (Level 2)
Securitization Notes(a)			$	3,743					$	3,509					$	3,743					$	3,391
Subsidiary Senior Unsecured Notes(b)			750						757						750						742
Term Loan A Facility(b)			500						495						717						716
Term Loan B Facility(b)			1,448						1,456						1,459						1,466
YUM Senior Unsecured Notes(b)			4,550						4,520						4,550						4,439

(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 and other investments, all of which are required to be measured at fair value on a recurring basis (see Note 12 for discussion regarding derivative instruments). The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.

																		Fair Value
						Condensed Consolidated Balance Sheet						Level						9/30/2024						12/31/2023
Assets
Investments						Other assets						1						$	1					$	125
Investments						Other assets						3						8						7
Interest Rate Swaps						Prepaid expenses and other current assets						2						9						24
Interest Rate Swaps						Other assets						2						—						2

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

Investments as of December 31, 2023, primarily included our approximate 5% minority interest in Devyani International Limited (“Devyani”), a franchise entity that operates KFC and Pizza Hut restaurants in India, with a fair value of $124 million. During the quarter ended March 31, 2024, we sold our ownership interest in Devyani for net proceeds of $104 million and recognized pre-tax investment losses of $20 million related to changes in fair value prior to the date of sale.

Note 14 - Contingencies

Internal Revenue Service Proposed Adjustment

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022, we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year. Additionally, interest on the underpayment is estimated to be approximately $1.3 billion

through the third quarter of 2024. The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion.

We disagree with the IRS’s position as asserted in the RAR and intend to contest that position vigorously. In September 2022, we filed a Protest with the IRS Examination Division disputing on multiple grounds the proposed underpayment of tax and penalties. In March 2023, we received the IRS Examination Division’s Rebuttal to our Protest and the matter is proceeding with the IRS Office of Appeals.

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.

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 September 30, 2024, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $350 million. The present value of these potential payments discounted at our pre-tax cost of debt at September 30, 2024, was approximately $300 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 September 30, 2024, 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 $130 million. Of this amount, $125 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. A hearing with the administrative tribunal that had been scheduled for October 8, 2024 has been rescheduled to January 21, 2025. A hearing held on October 16, 2024, before the Delhi

High Court has been continued to February 4, 2025, 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.