UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934 for the quarterly period ended	September 30, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

 Commission file number 1-13163

________________________

YUM! BRANDS, INC.

(Exact name of registrant as specified in its charter)

North Carolina				13-3951308
(State or other jurisdiction of				(I.R.S. Employer
incorporation or organization)				Identification No.)
1441 Gardiner Lane,	Louisville,	Kentucky		40213
(Address of principal executive offices)				(Zip Code)
Registrant’s telephone number, including area code:			(502)	874-8300

Securities registered pursuant to Section 12(b) of the Act
	Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
	Common Stock, no par value	YUM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No x

The number of shares outstanding of the registrant’s Common Stock as of November 3, 2022, was 281,687,866 shares.

YUM! BRANDS, INC.

INDEX

		Page
		No.
Part I.	Financial Information
	Item 1 - Financial Statements
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Shareholders' Deficit	8
	Notes to Condensed Consolidated Financial Statements	9
	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3 - Quantitative and Qualitative Disclosures About Market Risk	41
	Item 4 - Controls and Procedures	42
	Report of Independent Registered Public Accounting Firm	43
Part II.	Other Information and Signatures
	Item 1 - Legal Proceedings	44
	Item 1A - Risk Factors	44
	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	45
	Item 6 - Exhibits	46
	Signatures	47

2

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions, except per share data)
	Quarter ended				Year to date
Revenues	9/30/2022		9/30/2021		9/30/2022		9/30/2021
Company sales	$	479	$	513	$	1,448	$	1,509
Franchise and property revenues	760		716		2,211		2,080
Franchise contributions for advertising and other services	401		377		1,164		1,105
Total revenues	1,640		1,606		4,823		4,694
Costs and Expenses, Net
Company restaurant expenses	402		421		1,219		1,230
General and administrative expenses	261		253		768		689
Franchise and property expenses	28		31		89		81
Franchise advertising and other services expense	396		375		1,153		1,090
Refranchising (gain) loss	(3)		1		(15)		(21)
Other (income) expense	10		(2)		—		(12)
Total costs and expenses, net	1,094		1,079		3,214		3,057
Operating Profit	546		527		1,609		1,637
Investment (income) expense, net	(27)		(51)		(19)		(52)
Other pension (income) expense	2		1		3		6
Interest expense, net	124		126		390		416
Income Before Income Taxes	447		451		1,235		1,267
Income tax provision (benefit)	116		(77)		281		22
Net Income	$	331	$	528	$	954	$	1,245
Basic Earnings Per Common Share	$	1.16	$	1.78	$	3.33	$	4.17
Diluted Earnings Per Common Share	$	1.14	$	1.75	$	3.28	$	4.10
Dividends Declared Per Common Share	$	0.57	$	0.50	$	1.71	$	1.50
See accompanying Notes to Condensed Consolidated Financial Statements.

4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	Quarter ended				Year to date
	9/30/2022		9/30/2021		9/30/2022		9/30/2021
Net Income	$	331	$	528	$	954	$	1,245
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	(55)		(19)		(99)		(2)
	(55)		(19)		(99)		(2)
Tax (expense) benefit	—		—		—		—
	(55)		(19)		(99)		(2)
Changes in pension and post-retirement benefits
Unrealized gains (losses) arising during the period	20		3		20		61
Reclassification of (gains) losses into Net Income	5		5		14		16
	25		8		34		77
Tax (expense) benefit	(6)		(2)		(8)		(19)
	19		6		26		58
Changes in derivative instruments
Unrealized gains (losses) arising during the period	42		1		114		17
Reclassification of (gains) losses into Net Income	1		7		19		15
	43		8		133		32
Tax (expense) benefit	(11)		(2)		(33)		(8)
	32		6		100		24
Other comprehensive income (loss), net of tax	(4)		(7)		27		80
Comprehensive Income	$	327	$	521	$	981	$	1,325
See accompanying Notes to Condensed Consolidated Financial Statements.

5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	Year to date
	9/30/2022		9/30/2021
Cash Flows – Operating Activities
Net Income	$	954	$	1,245
Depreciation and amortization	104		117
Refranchising (gain) loss	(15)		(21)
Investment (income) expense, net	(19)		(52)
Deferred income taxes	3		(173)
Share-based compensation expense	64		58
Changes in accounts and notes receivable	(26)		—
Changes in prepaid expenses and other current assets	(3)		(5)
Changes in accounts payable and other current liabilities	(149)		24
Changes in income taxes payable	(3)		(45)
Other, net	65		144
Net Cash Provided by Operating Activities	975		1,292
Cash Flows – Investing Activities
Capital spending	(158)		(138)
Proceeds from refranchising of restaurants	51		48
Other, net	(5)		(33)
Net Cash Used In Investing Activities	(112)		(123)
Cash Flows – Financing Activities
Proceeds from long-term debt	999		4,150
Repayments of long-term debt	(678)		(3,647)
Repurchase shares of Common Stock	(714)		(857)
Dividends paid on Common Stock	(489)		(446)
Debt issuance costs	(11)		(37)
Other, net	(35)		(44)
Net Cash Used in Financing Activities	(928)		(881)
Effect of Exchange Rates on Cash and Cash Equivalents	(43)		(1)
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	(108)		287
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	771		1,024
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	$	663	$	1,311
See accompanying Notes to Condensed Consolidated Financial Statements.

6

CONDENSED CONSOLIDATED BALANCE SHEETS
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	(Unaudited) 9/30/2022		12/31/2021
ASSETS
Current Assets
Cash and cash equivalents	$	410	$	486
Accounts and notes receivable, net	579		596
Prepaid expenses and other current assets	606		450
Total Current Assets	1,595		1,532
Property, plant and equipment, net	1,114		1,207
Goodwill	633		657
Intangible assets, net	341		359
Other assets	1,429		1,487
Deferred income taxes	667		724
Total Assets	$	5,779	$	5,966
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and other current liabilities	$	1,156	$	1,334
Income taxes payable	16		13
Short-term borrowings	72		68
Total Current Liabilities	1,244		1,415
Long-term debt	11,517		11,178
Other liabilities and deferred credits	1,560		1,746
Total Liabilities	14,321		14,339
Shareholders’ Deficit
Common Stock, no par value, 750 shares authorized; 284 shares issued in 2022 and 289 issued in 2021	—		—
Accumulated deficit	(8,244)		(8,048)
Accumulated other comprehensive loss	(298)		(325)
Total Shareholders’ Deficit	(8,542)		(8,373)
Total Liabilities and Shareholders’ Deficit	$	5,779	$	5,966
See accompanying Notes to Condensed Consolidated Financial Statements.

7

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
Quarters and years to date ended September 30, 2022 and 2021
(in millions)
	Yum! Brands, Inc.
	Issued Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Deficit
	Shares	Amount
Balance at June 30, 2022	285	$	—	$	(8,274)	$	(294)	$	(8,568)
Net Income				331				331
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(55)		(55)
Pension and post-retirement benefit plans (net of tax impact of $6 million)						19		19
Net gain on derivative instruments (net of tax impact of $11 million)						32		32
Comprehensive Income								327
Dividends declared				(162)				(162)
Repurchase of shares of Common Stock	(1)	(18)		(139)				(157)
Employee share-based award exercises	—	(3)						(3)
Share-based compensation events		21						21
Balance at September 30, 2022	284	$	—	$	(8,244)	$	(298)	$	(8,542)
Balance at December 31, 2021	289	$	—	$	(8,048)	$	(325)	$	(8,373)
Net Income				954				954
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(99)		(99)
Pension and post-retirement benefit plans (net of tax impact of $8 million)						26		26
Net gain on derivative instruments (net of tax impact of $33 million)						100		100
Comprehensive Income								981
Dividends declared				(491)				(491)
Repurchase of shares of Common Stock	(6)	(55)		(659)				(714)
Employee share-based award exercises	1	(24)						(24)
Share-based compensation events		79						79
Balance at September 30, 2022	284	$	—	$	(8,244)	$	(298)	$	(8,542)
Balance at June 30, 2021	296	$	—	$	(7,569)	$	(324)	$	(7,893)
Net Income				528				528
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(19)		(19)
Pension and post-retirement benefit plans (net of tax impact of $2 million)						6		6
Net gain on derivative instruments (net of tax impact of $2 million)						6		6
Comprehensive Income								521
Dividends declared				(148)				(148)
Repurchase of shares of Common Stock	(2)	—		(330)				(330)
Employee share-based award exercises	—	(21)		(5)				(26)
Share-based compensation events		21						21
Balance at September 30, 2021	294	$	—	$	(7,524)	$	(331)	$	(7,855)
Balance at December 31, 2020	300	$	—	$	(7,480)	$	(411)	$	(7,891)
Net Income				1,245				1,245
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(2)		(2)
Pension and post-retirement benefit plans (net of tax impact of $19 million)						58		58
Net gain on derivative instruments (net of tax impact of $8 million)						24		24
Comprehensive Income								1,325
Dividends declared				(448)				(448)
Repurchase of shares of Common Stock	(7)	(24)		(836)				(860)
Employee share-based award exercises	1	(38)		(5)				(43)
Share-based compensation events		62						62
Balance at September 30, 2021	294	$	—	$	(7,524)	$	(331)	$	(7,855)
See accompanying Notes to Condensed Consolidated Financial Statements.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions, except per share data)

Note 1 - Financial Statement Presentation

We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.  Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements.  Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 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 nearly 54,000 restaurants in more than 155 countries and territories.  As of September 30, 2022, 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 food 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, 2022, 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, including, beginning in fiscal year 2022, our Habit Burger Grill Division, and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks. Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.

For fiscal year 2021, our Habit Burger Grill Division operated on a weekly periodic calendar where each quarter consisted of 13 weeks. The impact of this change in reporting calendar was not significant and accordingly, prior year amounts presented in these Condensed Consolidated Financial Statements have not been restated.

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 2021 Form 10-K, the results of the interim periods presented. Our results of operations, comprehensive income, cash flows and changes in shareholders' deficit for these interim periods are not necessarily indicative of the results to be expected for the full year.

Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax rate.

We have reclassified certain other items in the Financial Statements for the prior periods to be comparable with the classification for the quarter and year to date ended September 30, 2022. These reclassifications had no effect on previously reported Net Income.

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.

9

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. During the third quarter, we initiated the bidding process for the KFC Russia business and, as a result, those operations qualified for held-for-sale accounting at September 30, 2022. Total KFC Russia assets held-for-sale of $224 million and total KFC Russia liabilities held-for-sale of $82 million are included in Prepaid expenses and other current assets and Accounts payable and other current liabilities, respectively, in our Condensed Consolidated Balance Sheet at September 30, 2022. At September 30, 2022, we determined the carrying value of the KFC Russia asset group was recoverable based on expected sale proceeds.

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.

Note 2 - Earnings Per Common Share (“EPS”)

	Quarter ended				Year to date
	2022		2021		2022		2021
Net Income	$	331	$	528	$	954	$	1,245
Weighted-average common shares outstanding (for basic calculation)	285		296		287		298
Effect of dilutive share-based employee compensation	4		6		4		6
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	289		302		291		304
Basic EPS	$	1.16	$	1.78	$	3.33	$	4.17
Diluted EPS	$	1.14	$	1.75	$	3.28	$	4.10
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)	2.0		0.1		1.9		1.5

(a)These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.

10

Note 3 - 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, 2022 and 2021 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	2022	2021		2022		2021			2022
November 2019	—	4,746		$	—	$	530		$	—
May 2021	5,987	2,602		714		330			236
September 2022	—	—		—		—			2,000
Total	5,987	7,348	(a)	$	714	$	860	(a)	$	2,236

(a)    Includes the effect of $14 million in share repurchases (0.1 million shares) with trade dates on, or prior to, September 30, 2021, but cash settlement dates subsequent to September 30, 2021, and excludes the effect of $11 million in share repurchases (0.1 million shares) with trade dates on, or prior to, December 31, 2020, but cash settlement dates subsequent to December 31, 2020.

In May 2021, our Board of Directors authorized share repurchases from July 1, 2021 through December 31, 2022, of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock. As of September 30, 2022, $236 million remains available under this authorization. In September 2022, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024. The new authorization will take effect upon the earlier of the exhaustion or expiration of the authorization approved in May 2021.

11

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, 2022, net of tax	$	(250)	$	(27)	$	(17)	$	(294)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax	(55)		15		32		(8)
(Gains) losses reclassified from AOCI, net of tax	—		4		—		4
	(55)		19		32		(4)
Balance at September 30, 2022, net of tax	$	(305)	$	(8)	$	15	$	(298)
Balance at December 31, 2021, net of tax	$	(206)	$	(34)	$	(85)	$	(325)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax	(99)		15		86		2
(Gains) losses reclassified from AOCI, net of tax	—		11		14		25
	(99)		26		100		27
Balance at September 30, 2022, net of tax	$	(305)	$	(8)	$	15	$	(298)

Note 4 - Other (Income) Expense

	Quarter ended				Year to date
	9/30/2022		9/30/2021		9/30/2022		9/30/2021
Foreign exchange net (gain) loss	$	4	$	2	$	(8)	$	5
Impairment and closure expense	1		1		—		2
Other	5		(5)		8		(19)
Other (income) expense	$	10	$	(2)	$	—	$	(12)

Note 5 - 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.

12

	9/30/2022		12/31/2021
Accounts and notes receivable, gross	$	613	$	632
Allowance for doubtful accounts	(34)		(36)
Accounts and notes receivable, net	$	579	$	596

Property, Plant and Equipment, net

	9/30/2022		12/31/2021
Property, plant and equipment, gross	$	2,376	$	2,477
Accumulated depreciation and amortization	(1,262)		(1,270)
Property, plant and equipment, net	$	1,114	$	1,207

Assets held-for-sale totaled $228 million and $12 million as of September 30, 2022 and December 31, 2021, respectively, and are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Liabilities held-for-sale totaled $82 million as of September 30, 2022, and are included in Accounts payable and other current liabilities in our Condensed Consolidated Balance Sheets as of September 30, 2022. KFC Russia assets held-for-sale accounted for $224 million including property, plant and equipment of $69 million, of the $228 million, while KFC Russia liabilities held-for-sale accounted for all of the $82 million as of September 30, 2022.

Other Assets	9/30/2022		12/31/2021
Operating lease right-of-use assets(a)	$	734	$	809
Franchise incentives	174		164
Investment in Devyani International Limited (See Note 12)	127		118
Other	394		396
Other assets	$	1,429	$	1,487

(a)    Non-current operating lease liabilities of $721 million and $793 million as of September 30, 2022 and December 31, 2021, 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

	9/30/2022		12/31/2021
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	$	410	$	486
Restricted cash included in Prepaid expenses and other current assets(a)	178		250
Restricted cash and restricted cash equivalents included in Other assets(b)	34		35
Cash and restricted cash related to KFC Russia included in assets held-for-sale	41		—
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	$	663	$	771

(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.

13

Note 6 - Income Taxes

	Quarter ended						Year to date
	2022			2021			2022			2021
Income tax (benefit) provision	$	116		$	(77)		$	281		$	22
Effective tax rate	25.8		%	(17.0)		%	22.7		%	1.8		%

Our third quarter effective tax rate was higher than the prior year primarily due to the following:

•Lapping a $152 million tax benefit recorded in the quarter ended September 30, 2021, resulting from a KFC Europe reorganization in which we concentrated management responsibility for European (excluding the United Kingdom ("UK")) KFC franchise development, support operation and management oversight in Switzerland. Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC intellectual property 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 which resulted in the recording of the one-time tax benefit to record the deferred tax asset.

•Lower excess tax benefits on share-based compensation than those recognized in the quarter ended September 30, 2021.

•Higher tax expense recognized in the quarter ended September 30, 2022, associated with adjustments related to prior year taxes.

Our year-to-date effective tax rate was also higher than the prior year due to the items discussed above, as well as the following:

•Our decision to exit the Russia market is anticipated to result in a reduction in the tax basis of intellectual property rights held in Switzerland due to the expected loss of the 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 $69 million of net tax expense in the year to date ended September 30, 2022 associated with our decision to exit the Russia market.

•Lapping a $64 million tax benefit that was recorded in the quarter ended June 30, 2021, to remeasure deferred taxes necessitated by the enactment of the UK Finance Act 2021. The UK Finance Act increased the UK corporate income tax rate from 19% to 25%, beginning April 1, 2023.

•The items above were partially offset by $82 million of tax benefit discretely recorded in the quarter ended March 31, 2022, from the release of a valuation allowance on foreign tax credit carryforwards. 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. Accordingly, 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.

14

Note 7 - 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 9/30/2022
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	16	$	234	$	4	$	129	$	383
Franchise revenues		47		173		65		—		285
Property revenues		4		10		1		1		16
Franchise contributions for advertising and other services		7		136		72		1		216
China
Franchise revenues		61		—		17		—		78
Other
Company sales		96		—		—		—		96
Franchise revenues		291		13		62		—		366
Property revenues		15		—		—		—		15
Franchise contributions for advertising and other services		167		2