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	June 30, 2023
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 August 2, 2023, was 280,211,281 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	22
	Item 3 - Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4 - Controls and Procedures	39
	Report of Independent Registered Public Accounting Firm	40
Part II.	Other Information and Signatures
	Item 1 - Legal Proceedings	41
	Item 1A - Risk Factors	41
	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6 - Exhibits	42
	Signatures	43

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	6/30/2023		6/30/2022		6/30/2023		6/30/2022
Company sales	$	511	$	499	$	985	$	969
Franchise and property revenues	785		737		1,555		1,451
Franchise contributions for advertising and other services	391		400		792		763
Total revenues	1,687		1,636		3,332		3,183
Costs and Expenses, Net
Company restaurant expenses	415		415		818		817
General and administrative expenses	291		254		573		507
Franchise and property expenses	32		29		68		61
Franchise advertising and other services expense	388		396		783		757
Refranchising (gain) loss	(17)		(8)		(21)		(12)
Other (income) expense	5		(4)		15		(10)
Total costs and expenses, net	1,114		1,082		2,236		2,120
Operating Profit	573		554		1,096		1,063
Investment (income) expense, net	(29)		15		(5)		8
Other pension (income) expense	(1)		1		(3)		1
Interest expense, net	125		148		255		266
Income Before Income Taxes	478		390		849		788
Income tax provision	60		166		131		165
Net Income	$	418	$	224	$	718	$	623
Basic Earnings Per Common Share	$	1.49	$	0.78	$	2.55	$	2.16
Diluted Earnings Per Common Share	$	1.46	$	0.77	$	2.51	$	2.13
Dividends Declared Per Common Share	$	0.605	$	0.57	$	1.21	$	1.14
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
	6/30/2023		6/30/2022		6/30/2023		6/30/2022
Net Income	$	418	$	224	$	718	$	623
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	4		(21)		12		(44)
Reclassification of adjustments and (gains) losses into Net Income	60		—		60		—
	64		(21)		72		(44)
Tax (expense) benefit	—		—		—		—
	64		(21)		72		(44)
Changes in pension and post-retirement benefits
Unrealized gains (losses) arising during the period	—		—		—		—
Reclassification of (gains) losses into Net Income	1		4		1		9
	1		4		1		9
Tax (expense) benefit	—		(1)		(2)		(2)
	1		3		(1)		7
Changes in derivative instruments
Unrealized gains (losses) arising during the period	26		15		18		72
Reclassification of (gains) losses into Net Income	(8)		6		(11)		18
	18		21		7		90
Tax (expense) benefit	(5)		(5)		(2)		(22)
	13		16		5		68
Other comprehensive income, net of tax	78		(2)		76		31
Comprehensive Income	$	496	$	222	$	794	$	654
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
	6/30/2023		6/30/2022
Cash Flows – Operating Activities
Net Income	$	718	$	623
Depreciation and amortization	67		71
Refranchising (gain) loss	(21)		(12)
Investment (income) expense, net	(5)		8
Deferred income taxes	(73)		—
Share-based compensation expense	47		45
Changes in accounts and notes receivable	(21)		(4)
Changes in prepaid expenses and other current assets	(19)		(2)
Changes in accounts payable and other current liabilities	(107)		(213)
Changes in income taxes payable	19		(23)
Other, net	73		29
Net Cash Provided by Operating Activities	678		522
Cash Flows – Investing Activities
Capital spending	(122)		(97)
Proceeds from sale of KFC Russia	121		—
Proceeds from refranchising of restaurants	31		41
Other, net	(4)		(8)
Net Cash Provided by (Used In) Investing Activities	26		(64)
Cash Flows – Financing Activities
Proceeds from long-term debt	—		999
Repayments of long-term debt	(40)		(658)
Revolving credit facility, three months or less, net	(249)		—
Repurchase shares of Common Stock	(50)		(557)
Dividends paid on Common Stock	(339)		(327)
Debt issuance costs	—		(11)
Other, net	(20)		(32)
Net Cash Used in Financing Activities	(698)		(586)
Effect of Exchange Rates on Cash and Cash Equivalents	6		(15)
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	12		(143)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	647		771
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	$	659	$	628
See accompanying Notes to Condensed Consolidated Financial Statements.

6

CONDENSED CONSOLIDATED BALANCE SHEETS
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	(Unaudited) 6/30/2023		12/31/2022
ASSETS
Current Assets
Cash and cash equivalents	$	437	$	367
Accounts and notes receivable, net	656		648
Prepaid expenses and other current assets	422		594
Total Current Assets	1,515		1,609
Property, plant and equipment, net	1,162		1,171
Goodwill	641		638
Intangible assets, net	369		354
Other assets	1,340		1,324
Deferred income taxes	821		750
Total Assets	$	5,848	$	5,846
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and other current liabilities	$	1,063	$	1,251
Income taxes payable	50		16
Short-term borrowings	374		398
Total Current Liabilities	1,487		1,665
Long-term debt	11,194		11,453
Other liabilities and deferred credits	1,603		1,604
Total Liabilities	14,284		14,722
Shareholders’ Deficit
Common Stock, no par value, 750 shares authorized; 280 shares issued in 2023 and 2022	13		—
Accumulated deficit	(8,156)		(8,507)
Accumulated other comprehensive loss	(293)		(369)
Total Shareholders’ Deficit	(8,436)		(8,876)
Total Liabilities and Shareholders’ Deficit	$	5,848	$	5,846
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 June 30, 2023 and 2022
(in millions)
	Yum! Brands, Inc.
	Issued Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Deficit
	Shares	Amount
Balance at March 31, 2023	280	$	—	$	(8,403)	$	(371)	$	(8,774)
Net Income				418				418
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						4		4
Reclassification of translation adjustments into income						60		60
Pension and post-retirement benefit plans						1		1
Net gain on derivative instruments (net of tax impact of $5 million)						13		13
Comprehensive Income								496
Dividends declared				(171)				(171)
Repurchase of shares of Common Stock								—
Employee share-based award exercises	—	(10)						(10)
Share-based compensation events		23						23
Balance at June 30, 2023	280	$	13	$	(8,156)	$	(293)	$	(8,436)
Balance at December 31, 2022	280	$	—	$	(8,507)	$	(369)	$	(8,876)
Net Income				718				718
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						12		12
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 $2 million)						5		5
Comprehensive Income								794
Dividends declared				(341)				(341)
Repurchase of shares of Common Stock	—	(24)		(26)				(50)
Employee share-based award exercises	—	(20)						(20)
Share-based compensation events		57						57
Balance at June 30, 2023	280	$	13	$	(8,156)	$	(293)	$	(8,436)
Balance at March 31, 2022	286	$	—	$	(8,199)	$	(292)	$	(8,491)
Net Income				224				224
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(21)		(21)
Pension and post-retirement benefit plans (net of tax impact of $1 million)						3		3
Net gain on derivative instruments (net of tax impact of $5 million)						16		16
Comprehensive Income								222
Dividends declared				(164)				(164)
Repurchase of shares of Common Stock	(2)	(15)		(135)				(150)
Employee share-based award exercises	1	(5)						(5)
Share-based compensation events		20						20
Balance at June 30, 2022	285	$	—	$	(8,274)	$	(294)	$	(8,568)
Balance at December 31, 2021	289	$	—	$	(8,048)	$	(325)	$	(8,373)
Net Income				623				623
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(44)		(44)
Pension and post-retirement benefit plans (net of tax impact of $2 million)						7		7
Net gain on derivative instruments (net of tax impact of $22 million)						68		68
Comprehensive Income								654
Dividends declared				(329)				(329)
Repurchase of shares of Common Stock	(5)	(37)		(520)				(557)
Employee share-based award exercises	1	(21)						(21)
Share-based compensation events		58						58
Balance at June 30, 2022	285	$	—	$	(8,274)	$	(294)	$	(8,568)
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, 2022 (“2022 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 56,000 restaurants in more than 155 countries and territories.  As of June 30, 2023, 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 June 30, 2023, 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. 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 2022 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 items in the Financial Statements for the prior periods to be comparable with the classification for the quarter and year to date ended June 30, 2023. 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.

During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator. In April 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company owned KFC restaurants, operating system, and master franchise rights as well as the trademark for the Rostik’s brand. Under the sale and purchase agreement, the buyer has agreed to lead the process to rebrand KFC restaurants in Russia to Rostik's and to retain the Company's employees in Russia. We recorded a loss in the quarter of

9

$4 million to Other income (expense) as the write-off of our net investment in KFC Russia, including the related cumulative foreign currency translation losses of $60 million, exceeded the consideration received from the sale which primarily included cash proceeds of $121 million.

Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments. However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed the resulting net profits or losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense).

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

	Quarter ended				Year to date
	2023		2022		2023		2022
Net Income	$	418	$	224	$	718	$	623
Weighted-average common shares outstanding (for basic calculation)	281		286		281		288
Effect of dilutive share-based employee compensation	5		4		5		4
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	286		290		286		292
Basic EPS	$	1.49	$	0.78	$	2.55	$	2.16
Diluted EPS	$	1.46	$	0.77	$	2.51	$	2.13
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)	1.7		2.4		1.6		1.8

(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.

Note 3 - Shareholders' Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years ended June 30, 2023 and 2022 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	2023	2022	2023		2022		2023
May 2021	—	4,635	—		557		—
September 2022	387	—	50		—		1,700
Total	387	4,635	$	50	$	557	$	1,700

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. As of June 30, 2023, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under the September 2022 authorization.

10

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 March 31, 2023, net of tax	$	(282)	$	(96)	$	7	$	(371)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax	4		—		19		23
(Gains) losses reclassified from AOCI, net of tax	60		1		(6)		55
	64		1		13		78
Balance at June 30, 2023, net of tax	$	(218)	$	(95)	$	20	$	(293)
Balance at December 31, 2022, net of tax	$	(290)	$	(94)	$	15	$	(369)
OCI, net of tax
Gains (losses) arising during the period classified into AOCI, net of tax	12		(2)		13		23
(Gains) losses reclassified from AOCI, net of tax	60		1		(8)		53
	72		(1)		5		76
Balance at June 30, 2023, net of tax	$	(218)	$	(95)	$	20	$	(293)

Note 4 - Other (Income) Expense

	Quarter ended				Year to date
	6/30/2023		6/30/2022		6/30/2023		6/30/2022
Foreign exchange net (gain) loss	$	1	$	(8)	$	4	$	(12)
Impairment and closure expense	—		(1)		1		(1)
Other	4		5		10		3
Other (income) expense	$	5	$	(4)	$	15	$	(10)

Other (income) expense includes a $4 million loss in the quarter and year to date ended June 30, 2023, related to the sale of our KFC Russia business.

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.

11

	6/30/2023		12/31/2022
Accounts and notes receivable, gross	$	702	$	685
Allowance for doubtful accounts	(46)		(37)
Accounts and notes receivable, net	$	656	$	648

Property, Plant and Equipment, net

	6/30/2023		12/31/2022
Property, plant and equipment, gross	$	2,466	$	2,454
Accumulated depreciation and amortization	(1,304)		(1,283)
Property, plant and equipment, net	$	1,162	$	1,171

Assets held-for-sale totaled $6 million and $190 million as of June 30, 2023 and December 31, 2022, respectively, and are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Liabilities held-for-sale totaled $2 million and $65 million as of June 30, 2023 and December 31, 2022, respectively, and are included in Accounts payable and other current liabilities in our Condensed Consolidated Balance Sheets. Assets and liabilities held-for-sale as of December 31, 2022, primarily included the assets and liabilities of our KFC Russia business.

Other Assets	6/30/2023		12/31/2022
Operating lease right-of-use assets(a)	$	753	$	742
Franchise incentives	185		172
Investment in Devyani International Limited (See Note 12)	122		116
Other	280		294
Other assets	$	1,340	$	1,324

(a)    Non-current operating lease liabilities of $744 million and $731 million as of June 30, 2023 and December 31, 2022, 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

	6/30/2023		12/31/2022
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	$	437	$	367
Restricted cash included in Prepaid expenses and other current assets(a)	188		220
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	—		25
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	$	659	$	647

(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 6 - Income Taxes

	Quarter ended						Year to date
	2023			2022			2023			2022
Income tax (benefit) provision	$	60		$	166		$	131		$	165
Effective tax rate	12.6		%	42.6		%	15.4		%	21.0		%

Our second quarter effective tax rate was lower than the prior year primarily due to the following:

12

•$71 million of net tax expense recorded in the quarter ended June 30, 2022, resulting from the Company’s decision to exit KFC Russia. We remeasured and reassessed the need for a valuation allowance on deferred tax assets in Switzerland due to the then expected reduction in the tax basis of intellectual property rights associated with the loss of the Russian royalty income. In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference was going to reverse by way of sale.

•$18 million tax benefit recorded in the quarter ended June 30, 2023, associated with the reversal of a reserve established in prior years due to the favorable resolution of a tax audit in a foreign jurisdiction.

•$10 million tax benefit recorded in the quarter ended June 30, 2023, associated with establishing additional net operating loss carryforward deferred tax assets in a foreign jurisdiction.

Our year to date effective tax rate was lower than the prior year primarily due to the items discussed above, 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 made foreign taxes paid to certain countries no longer creditable in the U.S., which was expected to result in additional foreign tax credit carryforward utilization prospectively. As a result, we reversed a valuation allowance associated with existing foreign tax credit carryforwards. The U.S. Treasury published clarifying guidance in November 2022 which resulted in foreign taxes originally determined to be non-creditable under the January 2022 regulations to now be treated as creditable taxes. As such, the valuation allowance on foreign tax credit carryforwards that was released in the quarter ended March 31, 2022, was re-established in the quarter ended December 31, 2022.

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 6/30/2023
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	17	$	253	$	4	$	139	$	413
Franchise revenues		49		194		66		2		311
Property revenues		3		10		1		—		14
Franchise contributions for advertising and other services		8		148		74		1		231
China
Franchise revenues		61		—		16		—		77
Other
Company sales		98		—		—		—		98
Franchise revenues		290		14		65		—		369
Property revenues		13		—		1		—		14
Franchise contributions for advertising and other services		143		2		15		—		160
		$	682	$	621	$	242	$	142	$	1,687

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	Quarter ended 6/30/2022
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales	$	16	$	243	$	5	$	136	$	400
Franchise revenues	47		178		64		2		291
Property revenues	3		10		1		—		14
Franchise contributions for advertising and other services	7		142		72		—		221
China
Franchise revenues	48		—		13		—		61
Other
Company sales	99		—		—		—		99
Franchise revenues	283		11		63		—		357
Property revenues	13		—		1		—		14
Franchise contributions for advertising and other services	161		2		16		—		179
	$	677	$	586	$	235	$	138	$	1,636

	Year to date 6/30/2023
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	33	$	482	$	9	$	269	$	793
Franchise revenues		95		372		136		3		606
Property revenues		6		20		2		1		29
Franchise contributions for advertising and other services		16		288		152		1		457
China
Franchise revenues		127		—		34		—		161
Other
Company sales		192		—		—		—		192
Franchise revenues		574		27		131		—		732
Property revenues		26		—		1		—		27
Franchise contributions for advertising and other services		300		4		31		—		335
		$	1,369	$	1,193	$	496	$	274	$	3,332

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	Year to date 6/30/2022
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	31	$	457	$	10	$	261	$	759
Franchise revenues		92		335		128		3		558
Property revenues		6		21		2		—		29
Franchise contributions for advertising and other services		13		265		144		—		422
China
Franchise revenues		109		—		29		—		138
Other
Company sales		210		—		—		—		210
Franchise revenues		543		22		133		—		698
Property revenues		27		—		1		—		28
Franchise contributions for advertising and other services		306		3		32		—		341
		$	1,337	$	1,103	$	479	$	264	$	3,183

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 2023 is presented below.

	Deferred Franchise Fees
Balance at December 31, 2022	$	434
Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period	(43)
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period	37
Other(a)	(9)
Balance at June 30, 2023	$	419

(a)    Includes impact of foreign currency translation as well as the recognition of deferred franchise fees into Refranchising (gain) loss upon the termination of existing franchise agreements when entering into master franchise agreements.

We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:

Less than 1 year	$	69
1 - 2 years	63
2 - 3 years	57
3 - 4 years	50
4 - 5 years	43
Thereafter	137
Total	$	419

Note 8 - 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:

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	Quarter ended				Year to date
Revenues	2023		2022		2023		2022
KFC Division	$	682	$	677	$	1,369	$	1,337
Taco Bell Division	621		586		1,193		1,103
Pizza Hut Division	242		235		496		479
Habit Burger Grill Division	142		138		274		264
	$	1,687	$	1,636	$	3,332	$	3,183

	Quarter ended				Year to date
Operating Profit	2023		2022		2023		2022
KFC Division	$	326	$	293	$	631	$	584
Taco Bell Division	228		215		432		400
Pizza Hut Division	91		93		195		195
Habit Burger Grill Division	3		(2)		(2)		(10)
Corporate and unallocated G&A expenses(a)	(86)		(65)		(170)		(136)
Unallocated Franchise and property expenses(a)	(1)		(4)		(2)		(4)
Unallocated Refranchising gain (loss)	17		8		21		12
Unallocated Other income (expense)(a)	(5)		16		(9)		22
Operating Profit	$	573	$	554	$	1,096	$	1,063
Investment income (expense), net(b)	29		(15)		5		(8)
Other pension income (expense)	1		(1)		3		(1)
Interest expense, net(c)	(125)		(148)		(255)		(266)
Income before income taxes	$	478	$	390	$	849	$	788

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)Our operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer (see Note 1), within their historical financial statement line items and operating segments. However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net profits and losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense). As a result, we reclassed net operating losses of $1 million from KFC Division Other income (expense) to Unallocated Other income (expense) during the year to date ended June 30, 2023, and net operating profit of $9 million and $11 million from Divisional Other income (expense) to Unallocated Other income (expense) during the quarter and year to date ended June 30, 2022, respectively. Additionally, we recorded a $4 million loss to Unallocated Other income (expense) during the quarter and year to date ended June 30, 2023 from the sale of our KFC Russia business.

Also, included in Unallocated Other income (expense) were $1 million in foreign exchange losses attributable to fluctuations in the value of the Russian Ruble during the quarter and year to date ended June 30, 2023, and foreign exchange gains of $11 million and $16 million during the quarter and year to date ended June 30, 2022, respectively. Additionally, we recorded charges of $3 million and $4 million to Corporate and unallocated G&A expenses and $1 million and $2 million to Unallocated Franchise and property expenses during the quarter and year to date ended June 30, 2023, respectively, for certain expenses related to the disposition of the businesses and other costs related to our exit from Russia. We recorded similar charges of $2 million and $4 million to Corporate and Unallocated G&A expenses and Unallocated Franchise and property expenses, respectively, during the quarter and year to date ended June 30, 2022.

(b)Includes changes in the value of our investment in Devyani International Limited (see Note 12).

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(c)Includes a $23 million call premium and $5 million of unamortized debt issuance costs written off related to the redemption of the 2025 Notes (as discussed in our 2022 Form 10-K) during the quarter ended June 30, 2022.

Note 9 - 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
	2023		2022		2023		2022
Service cost	$	1	$	1	$	2	$	3
Interest cost	11		8		21		16
Expected return on plan assets	(13)		(11)		(25)		(23)
Amortization of net (gain) / loss	(1)		2		(1)		5
Amortization of prior service cost	1		2		1		3
Net periodic benefit cost	$	(1)	$	2	$	(2)	$	4

Note 10 - Short-term Borrowings and Long-term Debt

Short-term Borrowings	6/30/2023		12/31/2022
Current maturities of long-term debt	$	381	$	405
Less current portion of debt issuance costs and discounts	(7)		(7)
Short-term borrowings	$	374	$	398
Long-term Debt
Securitization Notes	$	3,753	$	3,772
Subsidiary Senior Unsecured Notes	750		750
Revolving Facility	30		279
Term Loan A Facility	727		736
Term Loan B Facility	1,466		1,474
YUM Senior Unsecured Notes	4,875		4,875
Finance lease obligations	52		57
	$	11,653	$	11,943
Less long-term portion of debt issuance costs and discounts	(78)		(85)
Less current maturities of long-term debt	(381)		(405)
Long-term debt	$	11,194	$	11,453

Details of our Short-term borrowings and Long-term debt as of December 31, 2022 can be found within our 2022 Form 10-K.

Cash paid for interest during the year to date ended June 30, 2023, was $293 million. Excluding the $28 million associated with the extinguishment of the 2025 Notes (as discussed in our 2022 Form 10-K), cash paid for interest during the year to date ended June 30, 2022 was $239 million.

Note 11 - Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in interest rates 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.

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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 June 30, 2023 and December 31, 2022, 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 June 30, 2023 or December 31, 2022.

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 June 30, 2023, 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
	2023		2022		2023		2022		2023		2022		2023		2022
Interest rate swaps	$	24	$	12	$	(7)	$	9	$	17	$	71	$	(12)	$	20
Income tax benefit/(expense)	(7)		(3)		2		(2)		(5)		(17)		3		(5)

As of June 30, 2023, 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 $33 million, based on current 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 June 30, 2023 and December 31, 2022, 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 June 30, 2023, 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 12 for the fair value of our derivative assets and liabilities.

Note 12 - Fair Value Disclosures

As of June 30, 2023, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings and 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:

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	6/30/2023				12/31/2022
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
Securitization Notes(a)	$	3,753	$	3,296	$	3,772	$	3,273
Subsidiary Senior Unsecured Notes(b)	750		729		750		731
Term Loan A Facility(b)	727		723		736		729
Term Loan B Facility(b)	1,466		1,458		1,474		1,459
YUM Senior Unsecured Notes(b)	4,875		4,605		4,875		4,473

(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 11 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	6/30/2023		12/31/2022
Assets
Investments	Other assets	1	$	124	$	118
Investments	Other assets	3	5		5
Interest Rate Swaps	Prepaid expenses and other current assets	2	33		26
Interest Rate Swaps	Other assets	2	14		16

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 primarily include 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 $122 million and $116 million at June 30, 2023 and December 31, 2022, respectively. For the quarter and year to date ended June 30, 2023, we recognized pre-tax investment gains of $28 million and $5 million, respectively, related to changes in fair value of our investment in Devyani.

Note 13 - 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 $880 million through the second quarter of 2023. 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. We have received the IRS Examination Division’s Rebuttal to our Protest and the case has been accepted by the IRS Office of Appeals.

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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 June 30, 2023, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $400 million. The present value of these potential payments discounted at our pre-tax cost of debt at June 30, 2023, was approximately $325 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 June 30, 2023, 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 $135 million. Of this amount, $130 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 August has been rescheduled to December 4, 2023. The stay order remains in effect and the next hearing in the Delhi High Court that had been scheduled for May has been rescheduled to October 5, 2023. 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

20

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.

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

Introduction and Overview

The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, (“2022 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements.  Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding.

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 56,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (collectively, the “Concepts”).  The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style and pizza categories, respectively. The Habit Burger Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 56,000 restaurants, 98% are operated by franchisees.

YUM currently consists of four operating segments:

•The KFC Division which includes our worldwide operations of the KFC concept

•The Taco Bell Division which includes our worldwide operations of the Taco Bell concept

•The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept

•The Habit Burger Grill Division which includes our worldwide operations of the Habit Burger Grill concept

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

Our global citizenship and sustainability strategy is reflected in our Good agenda, which includes our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.  

Our Growth agenda is based on four key drivers:

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

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

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

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

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

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

•Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees. To determine whether a restaurant meets the definition of a unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and has substantial and sustainable sales. We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit

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growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.

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

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

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

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

•Effective Tax Rate excluding Special Items;

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

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

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

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

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

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

Results of Operations

Summary  

All comparisons within this summary are versus the same period a year ago. The Financial Highlights tables below reflect the impact of removing the system sales of all Russian units from our system sales totals as of the beginning of the second quarter of 2022.

Quarterly Financial Highlights:

	% Change
	System Sales, ex FX	Same-Store Sales	Units	GAAP Operating Profit	Core Operating Profit
KFC Division	+19	+13	+7	+11	+16
Taco Bell Division	+7	+4	+5	+6	+6
Pizza Hut Division	+7	+4	+4	(2)	+1
YUM	+13	+9	+6	+4	+12

Year to date Financial Highlights:

	% Change
	System Sales, ex FX	Same-Store Sales	Units	GAAP Operating Profit	Core Operating Profit
KFC Division	+15	+11	+7	+8	+14
Taco Bell Division	+9	+6	+5	+8	+8
Pizza Hut Division	+8	+5	+4	Even	+4
YUM	+12	+8	+6	+3	+11

Additionally:

•As of the beginning of the second quarter of 2022, we elected to remove 1,165 Russia units from our unit count and begin excluding their associated sales from our total system sales. We removed 1,112 units and 53 units in Russia from our KFC and Pizza Hut units counts, respectively. As a result:

◦Year to date YUM and KFC Division system sales growth excluding foreign currency as shown above were negatively impacted by 1 and 2 percentage points, respectively.

•Also, we elected to reclass future net profits attributable to Russia subsequent to the date of invasion from the Division segments in which those profits were earned to Unallocated Other income and reflected such profits as a Special Item as they are not indicative of our ongoing results. As a result of the decline in Core Operating Profits attributable to Russia:

◦Both the quarter and year to date YUM and KFC Division Core Operating Profit as shown above were negatively impacted by 1 and 2 percentage points, respectively.

•Foreign currency translation unfavorably impacted Divisional Operating Profit by $17 million and $44 million for the quarter and year to date ended June 30, 2023, respectively.

	Second Quarter			Year to date
	2023	2022	% Change	2023	2022	% Change
GAAP EPS	$1.46	$0.77	+89	$2.51	$2.13	+18
Less Special Items EPS	$0.05	$(0.29)	NM	$0.05	$0.02	NM
EPS Excluding Special Items	$1.41	$1.06	+33	$2.46	$2.11	+17

24

•In addition to the aforementioned factors impacting Operating Profit, our 2023 diluted EPS, excluding Special Items, was favorably impacted by $0.09 and $0.02 for the quarter and year to date ended June 30, 2023, respectively, from mark to market adjustments from unrealized investment gains and was unfavorably impacted by $0.04 and $0.02 for the quarter and year to date ended June 30, 2022, respectively, from mark to market adjustments from unrealized investment losses. Foreign currency translation unfavorably impacted our diluted EPS, excluding Special Items, by approximately $0.05 and $0.12 for the quarter and year to date ended June 30, 2023, respectively.

•Gross unit openings for the quarter were 1,025 units resulting in 742 net new units. Gross unit openings for the year to date were 1,771 units resulting in 1,065 net new units.

Worldwide

GAAP Results

	Quarter ended								Year to date
	2023			2022			% B/(W)		2023			2022			% B/(W)
Company sales	$	511		$	499		3		$	985		$	969		2
Franchise and property revenues	785			737			6		1,555			1,451			7
Franchise contributions for advertising and other services	391			400			(2)		792			763			4
Total revenues	1,687			1,636			3		3,332			3,183			5
Company restaurant expenses	415			415			—		818			817			—
G&A expenses	291			254			(15)		573			507			(13)
Franchise and property expenses	32			29			(12)		68			61			(12)
Franchise advertising and other services expense	388			396			2		783			757			(3)
Refranchising (gain) loss	(17)			(8)			NM		(21)			(12)			NM
Other (income) expense	5			(4)			NM		15			(10)			NM
Total costs and expenses, net	1,114			1,082			(3)		2,236			2,120			(5)
Operating Profit	573			554			4		1,096			1,063			3
Investment (income) expense, net	(29)			15			NM		(5)			8			NM
Other pension (income) expense	(1)			1			NM		(3)			1			NM
Interest expense, net	125			148			15		255			266			4
Income before income taxes	478			390			22		849			788			8
Income tax provision (benefit)	60			166			64		131			165			21
Net Income	$	418		$	224		86		$	718		$	623		15
Diluted EPS(a)	$	1.46		$	0.77		89		$	2.51		$	2.13		18
Effective tax rate	12.6		%	42.6		%	30	ppts.	15.4		%	21.0		%	5.6	ppts.

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

Performance Metrics

Unit Count	6/30/2023	6/30/2022	% Increase (Decrease)
Franchise	55,416	52,363	6
Company-owned	1,009	987	2
Total	56,425	53,350	6

	Quarter ended		Year to date
	2023	2022	2023	2022
Same-store Sales Growth (Decline) %	9	1	8	2
System Sales Growth (Decline) %, reported	11	(1)	8	2
System Sales Growth (Decline) %, excluding FX	13	3	12	5

25

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

	Quarter ended				Year to date
	2023		2022		2023		2022
Consolidated
Company sales(a)	$	511	$	499	$	985	$	969
Franchise sales	14,916		13,457		29,457		27,133
System sales	15,427		13,956		30,442		28,102
Negative Foreign Currency Impact on System sales(b)	388		N/A		1,029		N/A
System sales, excluding FX	$	15,815	$	13,956	$	31,471	$	28,102
KFC Division
Company sales(a)	$	115	$	115	$	225	$	241
Franchise sales	8,183		7,137		16,130		14,744
System sales	8,298		7,252		16,355		14,985
Negative Foreign Currency Impact on System sales(b)	330		N/A		834		N/A
System sales, excluding FX	$	8,628	$	7,252	$	17,189	$	14,985
Taco Bell Division
Company sales(a)	$	253	$	243	$	482	$	457
Franchise sales	3,507		3,266		6,742		6,160
System sales	3,760		3,509		7,224		6,617
Negative Foreign Currency Impact on System sales(b)	—		N/A		10		N/A
System sales, excluding FX	$	3,760	$	3,509	$	7,234	$	6,617
Pizza Hut Division
Company sales(a)	$	4	$	5	$	9	$	10
Franchise sales	3,197		3,034		6,528		6,189
System sales	3,201		3,039		6,537		6,199
Negative Foreign Currency Impact on System sales(b)	58		N/A		185		N/A
System sales, excluding FX	$	3,259	$	3,039	$	6,722	$	6,199
Habit Burger Grill Division
Company sales(a)	$	139	$	136	$	269	$	261
Franchise sales	29		20		57		40
System sales	168		156		326		301
Foreign Currency Impact on System sales(b)	—		N/A		—		N/A
System sales, excluding FX	$	168	$	156	$	326	$	301

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

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

Non-GAAP Items
Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.
	Quarter ended				Year to date
	2023		2022		2023		2022
Core Operating Profit Growth (Decline) %	12		(1)		11		(3)
Diluted EPS Growth (Decline) %, excluding Special Items	33		(9)		17		(5)
Effective Tax Rate excluding Special Items	18.2	%	24.2	%	18.7	%	22.3	%

26

	Quarter ended						Year to date
	2023			2022			2023			2022
Company restaurant profit	$	96		$	84		$	167		$	152
Company restaurant margin %	18.9		%	16.8		%	17.0		%	15.7		%

Reconciliation of GAAP Operating Profit to Core Operating Profit	Quarter ended				Year to date
	2023		2022		2023		2022
Consolidated
GAAP Operating Profit	$	573	$	554	$	1,096	$	1,063
Detail of Special Items:
(Gain) loss associated with market-wide refranchisings(a)	(2)		1		(5)		(2)
Operating (profit) loss impact from decision to exit Russia(b)	9		(14)		12		(21)
Charges associated with Resource Optimization(c)	8		—		10		1
Other Special Items Expense	—		—		1		—
Special Items (Income) Expense - Operating Profit	15		(13)		18		(22)
Negative Foreign Currency Impact on Divisional Operating Profit(d)	17		N/A		44		N/A
Core Operating Profit	$	605	$	541	$	1,158	$	1,041
Special Items as shown above were recorded to the financial statement line items identified below.
Condensed Consolidated Summary of Results Line Item
General and administrative expenses	$	11	$	2	$	15	$	3
Franchise and property expenses	1		4		2		4
Refranchising (gain) loss	(2)		1		(5)		(2)
Other (income) expense	5		(20)		6		(27)
Special Items (Income) Expense - Operating Profit	$	15	$	(13)	$	18	$	(22)
KFC Division
GAAP Operating Profit	$	326	$	293	$	631	$	584
Negative Foreign Currency Impact on Divisional Operating Profit(d)	15		N/A		36		N/A
Core Operating Profit	$	341	$	293	$	667	$	584
Taco Bell Division
GAAP Operating Profit	$	228	$	215	$	432	$	400
Negative Foreign Currency Impact on Divisional Operating Profit(d)	—		N/A		1		N/A
Core Operating Profit	$	228	$	215	$	433	$	400
Pizza Hut Division
GAAP Operating Profit	$	91	$	93	$	195	$	195
Negative Foreign Currency Impact on Divisional Operating Profit(d)	2		N/A		7		N/A
Core Operating Profit	$	93	$	93	$	202	$	195
Habit Burger Grill Division
GAAP Operating Loss	$	3	$	(2)	$	(2)	$	(10)
Foreign Currency Impact on Divisional Operating Profit(d)	—		N/A		—		N/A
Core Operating Profit (Loss)	$	3	$	(2)	$	(2)	$	(10)
Reconciliation of GAAP Net Income to Net Income excluding Special Items
GAAP Net Income	$	418	$	224	$	718	$	623
Special Items (Income) Expense - Operating Profit	15		(13)		18		(22)
Special Items (Income) Expense - Interest Expense, net(e)	—		28		—		28
Special Items Tax (Benefit) Expense(f)	(30)		68		(32)		(12)
Net Income excluding Special Items	$	403	$	307	$	704	$	617

27

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS	$	1.46		$	0.77		$	2.51		$	2.13
Less Special Items Diluted EPS	0.05			(0.29)			0.05			0.02
Diluted EPS excluding Special Items	$	1.41		$	1.06		$	2.46		$	2.11
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate	12.6		%	42.6		%	15.4		%	21.0		%
Impact on Tax Rate as a result of Special Items	(5.6)		%	18.4		%	(3.3)		%	(1.3)		%
Effective Tax Rate excluding Special Items	18.2		%	24.2		%	18.7		%	22.3		%

(a)    Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings. During the quarters ended June 30, 2023 and 2022, we recorded net refranchising gains of $2 million and net refranchising losses of $1 million, respectively, that have been reflected as a Special Item. During the years ended June 30, 2023 and 2022, we recorded net refranchising gains of $5 million and $2 million, respectively, that have been reflected as a Special Item.

Additionally, we recorded net refranchising gains of $15 million and $9 million during the quarters ended June 30, 2023 and 2022, respectively, that have not been reflected as Special Items. During the years ended June 30, 2023 and 2022, we recorded net refranchising gains of $16 million and $10 million, respectively, that have not been reflected as Special Items. These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings and that we believe are indicative of our expected ongoing refranchising activity.

(b)In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia. We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee. Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts. During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator who has initiated the process of re-branding locations to a non-YUM concept. In April 2023, we completed our exit from the Russia market by selling the KFC business in Russia.

Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments. However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits or losses subsequent to such date from the Division segment results in which they were earned to Unallocated Other income (expense). Additionally, we have incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses. Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and a $4 million loss recorded during the quarter ended June 30, 2023 as a result of the sale of the KFC Russia business. The resulting net Operating Loss of $9 million and $12 million for the quarter and year to date ended June 30, 2023, respectively, and net Operating Profit of $14 million and $21 million for the quarter and year to date ended June 30, 2022, respectively, have been reflected as Special Items.

(c)We recorded charges of $8 million and $10 million during the quarter and year to date ended June 30, 2023, respectively, and $1 million during the year to date ended June 30, 2022, to General and administrative expenses related to a resource optimization program initiated in the third quarter of 2020. This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth. These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. Due to the scope and size of the resource optimization program, these charges have been reflected as Special Items.

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

28

(e)During the quarter ended June 30, 2022, the Company redeemed $600 million aggregate principal amount of 7.75% YUM Senior Unsecured Notes due in 2025 (the "2025 Notes"). The redemption amount was equal to 103.875% of the $600 million aggregate principal amount redeemed, reflecting a $23 million "call premium". We recognized the call premium and the write-off of $5 million of unamortized debt issuance costs associated with the 2025 Notes within Interest expense, net as a Special Item due to their size and the fact that the amounts are not indicative of our ongoing interest expense.

(f)The below table includes the detail of Special Items Tax (Benefit) Expense:

	Quarter ended				Year to date
	6/30/23		6/30/22		6/30/23		6/30/22
Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense	$	(2)	$	(3)	$	(2)	$	(1)
Tax (Benefit) Expense - Income tax impacts from decision to exit Russia	(6)		71		(8)		71
Tax (Benefit) - U.S. foreign tax credit regulations issued in January 2022	—		—		—		(82)
Tax (Benefit) - Other Income tax impacts recorded as Special	(22)		—		(22)		—
Special Items Tax (Benefit) Expense	$	(30)	$	68	$	(32)	$	(12)

Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Special Items Tax (Benefit) Expense includes $71 million of net tax expense recorded in the quarter ended June 30, 2022, resulting from the Company’s decision to exit KFC Russia. We remeasured and reassessed the need for a valuation allowance on deferred tax assets in Switzerland due to the then expected reduction in the tax basis of intellectual property rights associated with the loss of the Russian royalty income. In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference was going to reverse by way of sale.

Special Items Tax (Benefit) Expense includes a tax benefit discretely recorded in the quarter ended March 31, 2022 of $82 million. 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 made foreign taxes paid to certain countries no longer creditable in the U.S., which was expected to result in additional foreign tax credit carryforward utilization prospectively. As a result, we reversed a valuation allowance associated with existing foreign tax credit carryforwards. This valuation allowance reversal resulted in a one-time tax benefit of $82 million in the quarter ended March 31, 2022 that was reflected as a Special Item. The U.S Treasury published clarifying guidance in November 2022 which resulted in foreign taxes originally determined to be non-creditable under the January 2022 regulations to now be treated as creditable taxes. As such the valuation allowance on foreign tax credit carryforwards that was released in the quarter ended March 31, 2022, was re-established in the quarter ended December 31, 2022.

Other Income Tax impacts recorded as Special in the quarter and year to date ended June 30, 2023 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction. Such reserve was established in prior years related to deferred tax assets originally recorded as a Special Item as part of an intercompany restructuring of intellectual property. Other Income Tax impacts recorded as Special in the quarter and year to date ended June 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a market-wide refranchising event occurred.

29

Reconciliation of GAAP Operating Profit to Company Restaurant Profit
	Quarter ended 6/30/2023
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	326		$	228		$	91		$	3		$	(75)	$	573
Less:
Franchise and property revenues	416			218			149			2			—		785
Franchise contributions for advertising and other services	151			150			89			1			—		391
Add:
General and administrative expenses	90			49			53			13			86		291
Franchise and property expenses	16			9			6			—			1		32
Franchise advertising and other services expense	150			148			89			1			—		388
Refranchising (gain) loss	—			—			—			—			(17)		(17)
Other (income) expense	1			—			(1)			—			5		5
Company restaurant profit	$	16		$	66		$	—		$	14		$	—	$	96
Company sales	$	115		$	253		$	4		$	139		$	—	$	511
Company restaurant margin %	14.3		%	25.6		%	3.2		%	11.1		%	N/A		18.9		%

	Quarter ended 6/30/2022
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	293		$	215		$	93		$	(2)		$	(45)	$	554
Less:
Franchise and property revenues	394			199			142			2			—		737
Franchise contributions for advertising and other services	168			144			88			—			—		400
Add:
General and administrative expenses	89			39			50			11			65		254
Franchise and property expenses	14			8			2			1			4		29
Franchise advertising and other services expense	163			144			88			1			—		396
Refranchising (gain) loss	—			—			—			—			(8)		(8)
Other (income) expense	16			(1)			(3)			—			(16)		(4)
Company restaurant profit	$	13		$	62		$	—		$	9		$	—	$	84
Company sales	$	115		$	243		$	5		$	136		$	—	$	499
Company restaurant margin %	11.6		%	25.7		%	(8.0)		%	6.0		%	N/A		16.8		%

30

	Year to date 6/30/2023
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	631		$	432		$	195		$	(2)		$	(160)	$	1,096
Less:
Franchise and property revenues	828			419			304			4			—		1,555
Franchise contributions for advertising and other services	316			292			183			1			—		792
Add:
General and administrative expenses	179			94			104			26			170		573
Franchise and property expenses	42			14			9			1			2		68
Franchise advertising and other services expense	314			286			182			1			—		783
Refranchising (gain) loss	—			—			—			—			(21)		(21)
Other (income) expense	8			1			(3)			—			9		15
Company restaurant profit	$	30		$	116		$	—		$	21		$	—	$	167
Company sales	$	225		$	482		$	9		$	269		$	—	$	985
Company restaurant margin %	13.2		%	24.0		%	3.6		%	8.2		%	N/A		17.0		%

	Year to date 6/30/2022
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	584		$	400		$	195		$	(10)		$	(106)	$	1,063
Less:
Franchise and property revenues	777			378			293			3			—		1,451
Franchise contributions for advertising and other services	319			268			176			—			—		763
Add:
General and administrative expenses	173			75			100			23			136		507
Franchise and property expenses	38			14			4			1			4		61
Franchise advertising and other services expense	314			267			175			1			—		757
Refranchising (gain) loss	—			—			—			—			(12)		(12)
Other (income) expense	18			(1)			(5)			—			(22)		(10)
Company restaurant profit	$	31		$	109		$	—		$	12		$	—	$	152
Company sales	$	241		$	457		$	10		$	261		$	—	$	969
Company restaurant margin %	12.9		%	23.9		%	(4.4)		%	4.5		%	N/A		15.7		%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2023 and/or 2022 and/or are reasonably likely to impact future results. See also the Detail of Special Items in this MD&A for other items similarly impacting results.

Russia Invasion of Ukraine

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

31

During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator. In April 2023, we completed our exit from the Russian market by selling the KFC business in Russia to Smart Service Ltd., including all Russian company-owned KFC restaurants, operating system, and master franchise rights as well as the trademark for the Rostik’s brand.

As of the beginning of the second quarter of 2022, we elected to remove all Russia units from our unit count and their associated sales from our total system sales. We removed 1,112 units and 53 units in Russia from our global KFC and Pizza Hut units counts, respectively. This negatively impacted our system sales growth excluding foreign currency for YUM and KFC Division by 1 and 2 percentage points, respectively, for the year to date ended June 30, 2023. Russia units were removed from our same-store sales calculations as of the beginning of the second quarter of 2022.

Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of transfer or sale, within their historical financial statement line items and operating segments. However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we have reclassed such net operating profits or losses subsequent to that date from the Division segment results in which they were earned to Unallocated Other income (expense) and reflected such net profits as a Special item. Additionally, we have incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses. Also recorded in Unallocated Other income (expense) were foreign exchange impacts attributable to fluctuations in the value of the Russian ruble and a $4 million loss recorded during the quarter ended June 30, 2023 as a result of the sale of the KFC Russia business. The resulting net Operating Loss of $9 million and $12 million for the quarter and year to date ended June 30, 2023, respectively, and net Operating Profit of $14 million and $21 million for the quarter and year to date ended June 30, 2022, respectively, have been reflected as a Special Item.

Prior to the invasion, our Russian business has constituted approximately 3% of our total operating profit and 2% of our total system sales. During both the quarter and year to date ended June 30, 2023, our Core Operating Profits in Russia declined versus the prior year, negatively impacting YUM and KFC Division Core Operating Profit growth by 1 and 2 percentage points, respectively.

Impact of Foreign Currency Translation on Operating Profit

Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $17 million and $44 million for the quarter and year to date ended June 30, 2023, respectively. This included a negative impact to our KFC Division Operating Profit of $15 million and $36 million for the quarter and year to date ended June 30, 2023, respectively. For the second half of 2023, we currently expect changes in foreign currency to have an insignificant impact on Divisional Operating Profit.

Investment in Devyani

Changes in the fair value of our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, resulted in pre-tax gains of $28 million and $5 million in the quarter and year to date ended June 30, 2023, respectively, and pre-tax investment losses of $14 million and $7 million in the quarter and year to date ended June 30, 2022, respectively.

KFC Division

The KFC Division has 28,500 units, 86% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2023.

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	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2023			2022			Reported		Ex FX		2023			2022			Reported		Ex FX
System Sales	$	8,298		$	7,252		14		19		$	16,355		$	14,985		9		15
Same-Store Sales Growth (Decline) %	13			(1)			N/A		N/A		11			1			N/A		N/A
Company sales	$	115		$	115		1		7		$	225		$	241		(7)		—
Franchise and property revenues	416			394			5		9		828			777			7		11
Franchise contributions for advertising and other services	151			168			(9)		(6)		316			319			(1)		3
Total revenues	$	682		$	677		1		5		$	1,369		$	1,337		2		7
Company restaurant profit	$	16		$	13		24		34		$	30		$	31		(5)		3
Company restaurant margin %	14.3		%	11.6		%	2.7	ppts.	2.8	ppts.	13.2		%	12.9		%	0.3	ppts.	0.4	ppts.
G&A expenses	$	90		$	89		(1)		(2)		$	179		$	173		(3)		(5)
Franchise and property expenses	16			14			(10)		(15)		42			38			(11)		(17)
Franchise advertising and other services expense	150			163			8		4		314			314			—		(4)
Operating Profit	$	326		$	293		11		16		$	631		$	584		8		14

			% Increase (Decrease)
Unit Count	6/30/2023	6/30/2022
Franchise	28,282	26,300	8
Company-owned	218	221	(1)
Total	28,500	26,521	7

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 8%.

The year to date increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 7%, partially offset by the suspension of operations of our 70 company owned KFC restaurants in Russia in the first quarter of 2022. As discussed in the Introduction and Overview section of this MD&A, all units in Russia, both Company and franchised, were removed from our same-store sales calculations beginning April 1, 2022.

The quarterly and year to date increases in Company restaurant margin percentage were driven by driven by Company same-store sales growth, partially offset by commodity inflation.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by franchise same-store sales growth of 13% and 11%, respectively, and unit growth, partially offset by the impact of the sale of our Russia business during the quarter ended June 30, 2023.

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

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G&A

The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by higher expenses related to our annual incentive compensation programs, higher travel related costs, and higher headcount and salaries, partially offset by the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees.

The year to date increase in G&A, excluding the impact of foreign currency translation, was driven by higher headcount and salaries, higher expenses related to our annual incentive compensation programs, and higher travel related costs, partially offset by the impact of the sale of our Russia business during the quarter ended June 30, 2023 and lower professional fees.

Operating Profit

The quarterly and year to date increases in Operating Profit, excluding the impact of foreign currency translation, were driven by same-store sales growth and unit growth, partially offset by higher G&A, higher restaurant operating costs, and the negative impact of 2 percentage points on both quarterly and year to date operating profit growth as a result of lower profits in Russia.

Taco Bell Division

The Taco Bell Division has 8,320 units, 87% of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of June 30, 2023.

	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2023			2022			Reported		Ex FX		2023			2022			Reported		Ex FX
System Sales	$	3,760		$	3,509		7		7		$	7,224		$	6,617		9		9
Same-Store Sales Growth %	4			8			N/A		N/A		6			6			N/A		N/A
Company sales	$	253		$	243		4		4		$	482		$	457		5		5
Franchise and property revenues	218			199			9		9		419			378			11		11
Franchise contributions for advertising and other services	150			144			5		5		292			268			9		9
Total revenues	$	621		$	586		6		6		$	1,193		$	1,103		8		8
Company restaurant profit	$	66		$	62		4		4		$	116		$	109		6		6
Company restaurant margin %	25.6		%	25.7		%	(0.1)	ppts.	(0.1)	ppts.	24.0		%	23.9		%	0.1	ppts.	0.1	ppts.
G&A expenses	$	49		$	39		(25)		(25)		$	94		$	75		(25)		(25)
Franchise and property expenses	9			8			(6)		(6)		14			14			3		4
Franchise advertising and other services expense	148			144			(2)		(2)		286			267			(7)		(7)
Operating Profit	$	228		$	215		6		6		$	432		$	400		8		8

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			% Increase (Decrease)
Unit Count	6/30/2023	6/30/2022
Franchise	7,847	7,435	6
Company-owned	473	465	2
Total	8,320	7,900	5

Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by company same-store sales growth of 3% and 5% for the quarter and year to date, respectively, and unit growth partially offset by refranchising.

The quarterly decrease in Company restaurant margin percentage was driven by higher labor costs and commodity inflation partially offset by same-store sales growth.

The year to date increase in Company restaurant margin percentage was driven by same-store sales growth partially offset by higher labor costs and commodity inflation.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 4% and 6% for the quarter and year to date, respectively, and unit growth.

G&A

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

Operating Profit

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

Pizza Hut Division

The Pizza Hut Division has 19,242 units, 66% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2023.

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	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2023			2022			Reported		Ex FX		2023			2022			Reported		Ex FX
System Sales	$	3,201		$	3,039		5		7		$	6,537		$	6,199		5		8
Same-Store Sales Growth (Decline) %	4			(3)			N/A		N/A		5			(1)			N/A		N/A
Company sales	$	4		$	5		(9)		(9)		$	9		$	10		(3)		(3)
Franchise and property revenues	149			142			5		7		304			293			4		7
Franchise contributions for advertising and other services	89			88			1		1		183			176			4		4
Total revenues	$	242		$	235		3		4		$	496		$	479		4		6
Company restaurant profit	$	—		$	—		NM		NM		$	—		$	—		NM		NM
Company restaurant margin %	3.2		%	(8.0)		%	11.2	ppts.	11.2	ppts.	3.6		%	(4.4)		%	8.0	ppts.	8.0	ppts.
G&A expenses	$	53		$	50		(7)		(7)		$	104		$	100		(5)		(6)
Franchise and property expenses	6			2			(167)		(173)		9			4			(108)		(102)
Franchise advertising and other services expense	89			88			(2)		(2)		182			175			(4)		(5)
Operating Profit	$	91		$	93		(2)		1		$	195		$	195		Even		4

			% Increase (Decrease)
Unit Count	6/30/2023	6/30/2022
Franchise	19,221	18,569	4
Company-owned	21	22	(5)
Total	19,242	18,591	4

Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 4% and unit growth.

The year to date increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 5% and unit growth, partially offset by lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.

G&A

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher professional fees.

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

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Operating Profit

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by higher G&A and current year bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables.

The year to date increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth partially offset by higher G&A, lapping the upfront recognition of franchise fees related to unexercised development rights arising from a master franchise agreement and current year bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables.

Habit Burger Grill Division

The Habit Burger Grill Division has 363 units, the vast majority of which are in the U.S. The Company owned 85% of the Habit Burger Grill units in the U.S. as of June 30, 2023. 

	Quarter ended					Year to date
					% B/(W)					% B/(W)
	2023		2022		Reported	2023		2022		Reported
System Sales	$	168	$	156	9	$	326	$	301	8
Same-Store Sales Growth %	Even		(4)		N/A	Even		Even		N/A
Total revenues	$	142	$	138	4	$	274	$	264	4
Operating Profit (Loss)	$	3	$	(2)	NM	$	(2)	$	(10)	81

Unit Count	6/30/2023	6/30/2022	% Increase (Decrease)
Franchise	66	59	12
Company-owned	297	279	6
Total	363	338	7

Corporate & Unallocated

	Quarter ended								Year to date
(Expense) / Income	2023			2022			% B/(W)		2023			2022			% B/(W)
Corporate and unallocated G&A	$	(86)		$	(65)		(34)		$	(170)		$	(136)		(25)
Unallocated Franchise and property expenses (See Note 8)	(1)			(4)			NM		(2)			(4)			NM
Unallocated Refranchising gain (loss)	17			8			NM		21			12			NM
Unallocated Other income (expense) (See Note 8)	(5)			16			NM		(9)			22			NM
Investment income (expense), net (See Note 8)	29			(15)			NM		5			(8)			NM
Other pension income (expense) (See Note 9)	1			(1)			NM		3			(1)			NM
Interest expense, net	(125)			(148)			15		(255)			(266)			4
Income tax benefit (provision) (See Note 6)	(60)			(166)			64		(131)			(165)			21
Effective tax rate (See Note 6)	12.6		%	42.6		%	30.0	ppts.	15.4		%	21.0		%	5.6	ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher professional fees, higher current year expenses related to our annual incentive compensation programs, higher software costs and amortization and costs associated with the previously disclosed ransomware attack.

The year to date increase in Corporate and Unallocated G&A expense was driven by costs associated with the previously disclosed ransomware attack, higher professional fees, higher current year expenses related to our annual incentive compensation programs and higher software costs and amortization.

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Interest expense, net

The quarterly and year to date decrease in Interest expense, net was primarily driven by lapping of $28 millon of expense in the prior year relating to the call premium and unamortized debt issuance costs written-off associated with the redemption of the 2025 Notes (as discussed in our 2022 Form 10-K) and higher interest income. This decrease was partially offset by a higher weighted average interest rate on our outstanding borrowings.

Consolidated Cash Flows

Net cash provided by operating activities was $678 million in 2023 versus $522 million in 2022. The increase was primarily driven by an increase in Operating profit before Special Items, timing of spending on advertising and a decrease in incentive compensation payments, partially offset by higher interest payments.

Net cash provided by investing activities was $26 million in 2023 versus net cash used in investing activities of $64 million in 2022. The change was primarily driven by proceeds from the current year sale of KFC Russia, partially offset by higher current year capital spending.

Net cash used in financing activities was $698 million in 2023 versus $586 million in 2022. The change was primarily driven by lower net borrowings, partially offset by lower current year share repurchases.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores. Our annual operating cash flows have been in excess of $1.3 billion in each of the past four years and we expect that to continue to be the case in 2023. It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases. To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement which had $30 million outstanding as of June 30, 2023. We believe that our ongoing cash from operations, cash on hand, which was approximately $440 million at June 30, 2023, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2022 Form 10-K regarding our material cash requirements. Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Instruments

As of June 30, 2023, approximately 94%, including the impact of interest rate swaps, of our $11.6 billion of total debt outstanding, excluding the Revolving Facility balances, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%. We ended the quarter with a consolidated net leverage ratio of 4.7x EBITDA. We continually reassess our optimal leverage ratio to maximize shareholder returns. We target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's) with a balance sheet consistent with highly-levered peer restaurant franchise companies.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of June 30, 2023.

	2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2037		2043		Total
Securitization Notes	$	10					$	938	$	884	$	595	$	589			$	737							$	3,753
Credit Agreement	17		$	48	$	53	662		15		1,398														2,193
Revolving Facility							30																		30
Subsidiary Senior Unsecured Notes									750																750
YUM Senior Unsecured Notes	325														$	800	1,050		$	2,100	$	325	$	275	4,875
Total	$	352	$	48	$	53	$	1,630	$	1,649	$	1,993	$	589	$	800	$	1,787	$	2,100	$	325	$	275	$	11,601

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

Ransomware Attack

On January 18, 2023, the Company announced a ransomware attack that impacted certain Information Technology (“IT”) systems. Promptly upon the detection of the incident, the Company initiated response protocols and an investigation, engaged the services of industry-leading cybersecurity and forensics professionals and consulted Federal law enforcement. This incident resulted in the closure of fewer than 300 restaurants in one market for one day, and certain of the Company’s IT systems and data were affected. In addition, although data was taken from our network, with our forensic investigation complete we have concluded that the affected data was limited to certain personal information of former and current employees, and there continues to be no evidence that customer databases were accessed.

We have incurred, and may continue to incur, certain expenses related to this attack, including expenses to respond to, remediate and investigate this matter. In addition, several separate putative class actions have been filed in U.S. federal and state court by current and/or former employees alleging violations of privacy and other rights in connection with the ransomware incident. We do not believe the impact of the incident or the aforementioned matters will ultimately have a material adverse effect on our business, results of operations or financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended June 30, 2023, to the disclosures made in Item 7A of the Company’s 2022 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report.  Based on the evaluation, performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the report.

Changes in Internal Control

There were no changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2023.

Forward-Looking Statements

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. Forward-looking statements are based on our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections will be achieved. Factors that could cause actual results and events to differ materially from our expectations and forward-looking statements include (i) the factors described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2 of this report, (ii) any risks and uncertainties described in the Risk Factors included in Part II, Item 1A of this report, (iii) the factors described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2022, and (iv) the risks and uncertainties described in the Risk Factors included in Part I, Item 1A of our Form 10-K for the year ended December 31, 2022. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. We are not undertaking to update any of these statements.

39

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Yum! Brands, Inc.:

Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of Yum! Brands, Inc. and subsidiaries (YUM) as of June 30, 2023, the related condensed consolidated statements of income, comprehensive income, and shareholders’ deficit for the three-month and six-month periods ended June 30, 2023 and 2022, the related condensed consolidated statements of cash flows for the six-month periods ended June 30, 2023 and 2022, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of YUM as of December 31, 2022, and the related consolidated statements of income, comprehensive income, shareholders’ deficit, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of YUM’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to YUM in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Louisville, Kentucky

August 7, 2023

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PART II – OTHER INFORMATION AND SIGNATURES

Item 1. Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 13 to the Company’s Condensed Consolidated Financial Statements set forth in Part I of this report.

Item 1A. Risk Factors

We face a variety of risks that are inherent in our business and our industry, including operational, legal, regulatory and product risks. Such risks could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. There have been no material changes from the risk factors disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended June 30, 2023, we did not repurchase shares of our Common Stock. 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. As of June 30, 2023, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under this authorization.

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Item 6. Exhibits

(a)	Exhibit Index
	Exhibit No.	Exhibit Description
	10.1	Refinancing Amendment No. 6, dated as of June 28, 2023, to Credit Agreement dated as of June 16, 2016 among Pizza Hut Holdings, LLC, KFC Holding Co. and Taco Bell of America, LLC, as borrowers, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent for the Lenders, as attached herein.
	15	Letter from KPMG LLP regarding Unaudited Interim Financial Information (Acknowledgement of Independent Registered Public Accounting Firm)
	31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	†	Indicates a management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized officer of the registrant.

YUM! BRANDS, INC.

(Registrant)

Date:	August 7, 2023	/s/ David E. Russell
		Senior Vice President, Finance and Corporate Controller
		(Principal Accounting Officer)

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