Yum! Brands YUM · USD

Reportable Operating SegmentsSee Note 1 for a description of our operating segments.The Company's operating segments maintain separate financial information, and the CODM, the Company's Chief Executive Officer, evaluates the operating segments' operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company's segments based on Divisional Operating Profit and is involved in determining and reviewing forecasted Divisional Operating Profit as part of the annual plan process. Throughout the year, the CODM considers forecast to actual results and variances on a monthly and quarterly basis to allocate resources for the segments' operations. The CODM also considers this information in determining how to prioritize capital allocation, including investments in restaurant development, technology and human capital, while maintaining a strong and flexible balance sheet, offering a competitive dividend and returning excess cash to shareholders. Our CODM manages assets on a consolidated basis. Accordingly, segment assets are not reported to our CODM or used in his decisions to allocate resources or assess performance of the segments. Therefore, total segment assets and long-lived assets have not been disclosed. The significant expense categories and amounts presented in the tables below align with the segment-level information that is regularly provided to the CODM.

Revenue RecognitionDisaggregation of Total RevenuesThe 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. 2025KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionTotalU.S.Company sales$106 $1,272 $33 $555 $1,966 Franchise revenues189 960 263 8 1,421 Property revenues13 36 4 3 56 Franchise contributions for advertising and other services47 740 292 3 1,082 ChinaFranchise revenues274 — 69 — 343 OtherCompany sales951 8 19 — 978 Franchise revenues1,285 63 265 — 1,613 Property revenues45 — 1 — 47 Franchise contributions for advertising and other services632 14 68 — 714 $3,542 $3,095 $1,013 $570 $8,220 (a)(a) Does not include charges of $7 million to Unallocated franchise and property revenues primarily associated with our Pizza Hut Strategic Options Review during the year ended December 31, 2025. See Note 5.2024KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionTotalU.S.Company sales$75 $1,154 $8 $588 $1,825 Franchise revenues194 899 289 7 1,389 Property revenues14 39 4 2 59 Franchise contributions for advertising and other services45 697 315 3 1,060 ChinaFranchise revenues259 1 67 — 327 OtherCompany sales726 1 — — 727 Franchise revenues1,172 58 261 — 1,491 Property revenues46 — 1 — 47 Franchise contributions for advertising and other services568 11 63 — 642 $3,099 $2,860 $1,008 $600 $7,567 (b)(b) Does not include charges of $18 million to Unallocated franchise and property revenues associated with the Turkey termination during the year ended December 31, 2024. See Note 5.2023KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionTotalU.S.

Share-based and Deferred Compensation PlansOverviewAt year end 2025, we had one stock award plan in effect: the Yum! Brands, Inc. 2025 Long-Term Incentive Plan (the “LTIP”). Potential awards to employees and non-employee directors under the LTIP include stock options, incentive stock options, SARs, restricted stock, RSUs, performance restricted stock units, PSUs and performance units. We have issued only stock options, SARs, RSUs and PSUs under the LTIP. Under the LTIP, the exercise price of stock options and SARs granted must be equal to or greater than the average market price or the ending market price of the Company’s stock on the date of grant. While awards under the LTIP can have varying vesting provisions and exercise periods, outstanding awards under the LTIP vest in periods ranging from immediate to four years. Stock options and SARs generally expire ten years after grant. At year end 2025, approximately 17 million shares were available for future share-based compensation grants under the LTIP.Our EID Plan allows participants to defer receipt of a portion of their annual salary and all or a portion of their incentive compensation. As defined by the EID Plan, we credit the amounts deferred with earnings based on the investment options selected by the participants. These investment options are limited to cash, phantom shares of our Common Stock, phantom shares of a Stock Index Fund and phantom shares of a Bond Index Fund. Investments in cash and phantom shares of both index funds will be distributed in cash at a date as elected by the employee and therefore are classified as a liability on our Consolidated Balance Sheets. We recognize compensation expense for the appreciation or the depreciation, if any, of investments in cash and both of the index funds. Deferrals into the phantom shares of our Common Stock will be distributed in shares of our Common Stock, under the LTIP, at a date as elected by the employee and therefore are classified in Common Stock on our Consolidated Balance Sheets. We do not recognize compensation expense for the appreciation or the depreciation, if any, of investments in phantom shares of our Common Stock. Our EID plan also allows certain participants to defer incentive compensation to purchase phantom shares of our Common Stock and receive a 33% Company match on the amount deferred.

Lease AccountingComponents of Lease Cost202520242023Operating lease cost$158 $135 $130 Finance lease costAmortization of right-of-use assets7 7 6 Interest on lease liabilities4 2 2 Total finance lease cost$11 $9 $8 Sublease income$(49)$(48)$(51)Supplemental Cash Flow Information202520242023Cash paid for amounts included in the measurement of lease liabilitiesOperating cash flows from operating leases$158 $137 $127 Operating cash flows from finance leases4 2 2 Financing cash flows from finance leases7 8 7 Right-of-use assets obtained in exchange for lease obligations(a)Operating leases414 247 127 Finance leases84 26 6 Operating lease liabilities transferred through refranchising(13)(8)(14)Finance lease and other debt obligations transferred through refranchising — (1)(5)(a) The year ended December 31, 2025, includes $218 million and $71 million of operating and finance lease right-of-use assets, respectively, acquired as part of the Taco Bell Southeast U.S. restaurant acquisition (see Note 3). The year ended December 31, 2024, includes $124 million and $22 million of operating and finance lease right-of-use assets, respectively, acquired as part of the KFC U.K. and Ireland restaurant acquisition (see Note 3).Supplemental Balance Sheet Information20252024Consolidated Balance SheetAssetsOperating lease right-of-use assets$1,213 $881 Other assetsFinance lease right-of-use assets128 49 Property, plant and equipment, netTotal right-of-use assets(a)$1,341 $930 LiabilitiesCurrentOperating$105 $91 Accounts payable and other current liabilitiesFinance11 8 Short-term borrowingsNon-currentOperating1,174 862 Other liabilities and deferred creditsFinance137 59 Long-term debtTotal lease liabilities(a)$1,427 $1,020 Weighted-average Remaining Lease Term (in years)Operating leases12.610.9Finance leases17.414.8Weighted-average Discount RateOperating leases5.4 %5.3 %Finance leases5.6 %5.5 %(a) U.S. operating lease right-of-use assets and liabilities totaled $846 million and $903 million, respectively, as of December 31, 2025, and $549 million and $615 million, respectively, as of December 31, 2024. These amounts primarily related to Taco Bell U.S. and Habit Burger & Grill leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell and Habit Burger & Grill restaurant support center.

Restaurant AcquisitionsIn 2025 and 2024, we completed restaurant acquisitions from franchisees as detailed below. In each transaction, the acquisition was accounted for as a business combination using the acquisition method of accounting. The allocation of the purchase price for each acquisition is based on management's analysis, which may include analysis performed by third party valuation specialists, as of the respective acquisition dates. In completing our purchase price allocations, we continue to obtain information to assist in determining the fair value of assets acquired and liabilities assumed and the classification of acquired leases during a one-year measurement period subsequent to the acquisition.For all of these restaurant acquisitions, reacquired franchise rights are the primary intangible asset we recognize when acquiring restaurants from franchisees and were valued based on after-royalty cash flows expected to be earned by the acquired restaurants over the remaining term of their then-existing franchise agreements. The excess of the purchase price over the estimated fair value of the net, identifiable assets acquired was recorded as goodwill. The goodwill recognized represents expected benefits of the acquisition that do not qualify for recognition as intangible assets. This includes value arising from cash flows expected to be earned in years subsequent to the expiration of the terms of franchise agreements existing upon acquisition. The goodwill is expected to be partially deductible for income tax purposes and has been allocated to the respective reporting units. The financial results of all acquired restaurants have been included in our Consolidated Financial Statements since the respective dates of the acquisitions, which individually and in the aggregate, did not significantly impact our results for the year ended December 31, 2025. Pro forma financial information for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Consolidated Financial Statements for both the 2025 and 2024 reporting periods. The direct transaction costs associated with the acquisitions were expensed as incurred, including $7 million associated with the Taco Bell Southeast U.S. restaurant acquisition in 2025. Taco Bell Southeast U.S. Restaurant AcquisitionDuring the fourth quarter of 2025, we completed the acquisition of 128 Taco Bell restaurants across the Southeast U.S. from a franchisee.

ContingenciesInternal Revenue Service Proposed AdjustmentFollowing an Internal Revenue Service (“IRS”) audit for the 2013 to 2015 fiscal years, we were unable to resolve underpayments of tax that the IRS proposed resulting from that audit using the IRS Appeals process, a pre-litigation, alternative dispute resolution tool. The IRS asserts an underpayment of tax of approximately $2.1 billion plus $418 million in penalties for fiscal year 2014. Both amounts are subject to interest, with interest of approximately $2.1 billion accruing through December 31, 2025. Those amounts relate primarily to a series of reorganizations that we undertook in 2014 in connection with the business realignment of our corporate and management reporting structure along brand lines. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion.We disagree with the IRS’s position and are contesting that position vigorously. On June 4, 2025, we filed a petition in the United States Tax Court disputing the IRS's position as set forth in a Notice of Deficiency. The IRS filed its Answer on September 12, 2025. The litigation is ongoing.The Company does not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution. The Company believes that it is more likely than not the Company’s tax position will be sustained; therefore, no reserve is recorded with respect to this matter.An unfavorable resolution of this matter could have a material, adverse impact on our Consolidated Financial Statements in future periods.Lease GuaranteesAs 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 December 31, 2025, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $325 million. The present value of these potential payments discounted at our pre-tax cost of debt at December 31, 2025, was approximately $275 million. Our franchisees are the primary lessees under the vast majority of these leases.

Shareholders’ DeficitUnder the authority of our Board of Directors, we repurchased shares of our Common Stock during 2025, 2024 and 2023. All amounts exclude applicable transaction fees and excise taxes on share repurchases. Shares Repurchased(thousands)Dollar Value of SharesRepurchasedAuthorization Date202520242023202520242023May 20243,739 2,916 — $550 $391 $— September 2022— 366 387 — 50 50 Total3,739 3,282 387 $550 $441 $50 In May 2024, our Board of Directors authorized share repurchases of up to $2.0 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026. The new authorization took effect on July 1, 2024 upon the expiration of a prior authorization approved in September 2022. As of December 31, 2025, we have remaining capacity to repurchase up to $1.1 billion of Common Stock under the May 2024 authorization.Changes in AOCI are presented below.Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term NaturePension and Post-Retirement Benefits(a)Derivative Instruments(b)TotalBalance at December 31, 2023, net of tax$(201)$(104)$3 $(302)OCI, net of taxGains (losses) arising during the year classified into AOCI, net of tax(37)(42)10 (69)(Gains) losses reclassified from AOCI, net of tax— 3 (24)(21)(37)(39)(14)(90)Balance at December 31, 2024, net of tax$(238)$(143)$(11)$(392)OCI, net of taxGains (losses) arising during the year classified into AOCI, net of tax77 7 6 90 (Gains) losses reclassified from AOCI, net of tax— 4 (13)(9)77 11 (7)81 Balance at December 31, 2025, net of tax$(161)$(132)$(18)$(311)(a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2025 include amortization of net losses of $2 million, settlement charges of $3 million and related income tax benefit of $1 million. Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2024 include amortization of net losses of $2 million and amortization of prior service cost of $1 million. See Note 15.(b) See Note 13 for details on amounts reclassified from AOCI. Amounts include previously cash settled treasury locks relating to our Senior Unsecured Notes due in 2037 which are being reclassified into earnings through 2037 to interest expense.

Fair Value DisclosuresAs of December 31, 2025, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings, accounts payable and borrowings under our Revolving Facility approximated their fair values because of the short-term nature of these instruments. The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value. The following table presents the carrying value and estimated fair value of the Company’s debt obligations: 20252024 Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2)Securitization Notes(a)$4,306 $4,160 $3,743 $3,561 Subsidiary Senior Unsecured Notes(b)750 753 750 739 Term Loan A Facility(b)494 492 500 496 Term Loan B Facility(b)1,429 1,440 1,444 1,451 YUM Senior Unsecured Notes(b)4,550 4,581 4,550 4,368 (a) We estimated the fair value of the Securitization Notes using market quotes and calculations. The markets in which the Securitization Notes trade are not considered active markets. (b) We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility, and Term Loan B Facility using market quotes and calculations based on market rates.Recurring Fair Value MeasurementsThe fair values of the assets and liabilities of the Company that are required to be measured at fair value on a recurring basis (see Note 13 for discussion regarding derivative instruments) were not significant at December 31, 2025 or 2024.Non-Recurring Fair Value MeasurementsDuring the years ended December 31, 2025, 2024 and 2023, we recognized non-recurring fair value measurements of $14 million, $13 million and $11 million, respectively, related to restaurant-level impairment. Restaurant-level impairment charges are recorded in Other (income) expense and resulted primarily from our impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The fair value measurements used in these impairment evaluations were based on discounted cash flow estimates using unobservable inputs (Level 3). These amounts exclude fair value measurements made for assets that were subsequently disposed of prior to those respective year end dates. The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2025 and 2024 was $19 million and $21 million, respectively.