

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934 for the quarterly period ended	September 30, ~~2021~~2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

Commission file number 1-13163

________________________

YUM! BRANDS, INC.

(Exact name of registrant as specified in its charter)

North Carolina

13-3951308

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1441 Gardiner Lane,

Louisville,

Kentucky

40213

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(502)

874-8300


Securities registered pursuant to Section 12(b) of the Act

	Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
	Common Stock, no par value	YUM	New York Stock Exchange

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

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

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

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

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

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

The number of shares outstanding of the registrant’s Common Stock as of ~~October 28, 2021,~~November 3, 2022, was ~~293,133,103~~281,687,866 shares.

YUM! BRANDS, INC.

INDEX


		Page
		No.
Part I.	Financial Information

	Item 1 - Financial Statements

	Condensed Consolidated Statements of Income	4

	Condensed Consolidated Statements of Comprehensive Income	5

	Condensed Consolidated Statements of Cash Flows	6

	Condensed Consolidated Balance Sheets	7

	Condensed Consolidated Statements of Shareholders' Deficit	8

	Notes to Condensed Consolidated Financial Statements	9

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3 - Quantitative and Qualitative Disclosures About Market Risk	4241

	Item 4 –- Controls and Procedures	42

	Report of Independent Registered Public Accounting Firm	4443

Part II.	Other Information and Signatures

	Item 1 –- Legal Proceedings	4544

	Item 1A –- Risk Factors	4544

	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	45



	Item 6 –- Exhibits	46

	Signatures	47

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)									CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES	YUM! BRANDS, INC. AND SUBSIDIARIES									YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions, except per share data)	(in millions, except per share data)									(in millions, except per share data)
		Quarter ended				Year to date					Quarter ended				Year to date
Revenues	Revenues	9/30/2021		9/30/2020		9/30/2021		9/30/2020		Revenues	9/30/2022		9/30/2021		9/30/2022		9/30/2021
Company sales	Company sales	$	513	$	486	$	1,509	$	1,244	Company sales	$	479	$	513	$	1,448	$	1,509
Franchise and property revenues	Franchise and property revenues	716		639		2,080		1,760		Franchise and property revenues	760		716		2,211		2,080
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	377		323		1,105		905		Franchise contributions for advertising and other services	401		377		1,164		1,105
Total revenues	Total revenues	1,606		1,448		4,694		3,909		Total revenues	1,640		1,606		4,823		4,694
Costs and Expenses, Net	Costs and Expenses, Net									Costs and Expenses, Net
Company restaurant expenses	Company restaurant expenses	421		399		1,230		1,046		Company restaurant expenses	402		421		1,219		1,230
General and administrative expenses	General and administrative expenses	253		257		689		724		General and administrative expenses	261		253		768		689
Franchise and property expenses	Franchise and property expenses	31		13		81		107		Franchise and property expenses	28		31		89		81
Franchise advertising and other services expense	Franchise advertising and other services expense	375		313		1,090		887		Franchise advertising and other services expense	396		375		1,153		1,090
Refranchising (gain) loss	Refranchising (gain) loss	1		(9)		(21)		(30)		Refranchising (gain) loss	(3)		1		(15)		(21)
Other (income) expense	Other (income) expense	(2)		4		(12)		154		Other (income) expense	10		(2)		—		(12)
Total costs and expenses, net	Total costs and expenses, net	1,079		977		3,057		2,888		Total costs and expenses, net	1,094		1,079		3,214		3,057
Operating Profit	Operating Profit	527		471		1,637		1,021		Operating Profit	546		527		1,609		1,637
Investment (income) expense, net	Investment (income) expense, net	(51)		(10)		(52)		(67)		Investment (income) expense, net	(27)		(51)		(19)		(52)
Other pension (income) expense	Other pension (income) expense	1		4		6		9		Other pension (income) expense	2		1		3		6
Interest expense, net	Interest expense, net	126		161		416		411		Interest expense, net	124		126		390		416
Income Before Income Taxes	Income Before Income Taxes	451		316		1,267		668		Income Before Income Taxes	447		451		1,235		1,267
Income tax (benefit) provision		(77)		33		22		96
Income tax provision (benefit)										Income tax provision (benefit)	116		(77)		281		22
Net Income	Net Income	$	528	$	283	$	1,245	$	572	Net Income	$	331	$	528	$	954	$	1,245

Basic Earnings Per Common Share	Basic Earnings Per Common Share	$	1.78	$	0.94	$	4.17	$	1.89	Basic Earnings Per Common Share	$	1.16	$	1.78	$	3.33	$	4.17

Diluted Earnings Per Common Share	Diluted Earnings Per Common Share	$	1.75	$	0.92	$	4.10	$	1.86	Diluted Earnings Per Common Share	$	1.14	$	1.75	$	3.28	$	4.10

Dividends Declared Per Common Share	Dividends Declared Per Common Share	$	0.50	$	0.47	$	1.50	$	1.41	Dividends Declared Per Common Share	$	0.57	$	0.50	$	1.71	$	1.50

See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.									See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)									CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES	YUM! BRANDS, INC. AND SUBSIDIARIES									YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)	(in millions)									(in millions)
		Quarter ended				Year to date					Quarter ended				Year to date
		9/30/2021		9/30/2020		9/30/2021		9/30/2020			9/30/2022		9/30/2021		9/30/2022		9/30/2021

Net Income	Net Income	$	528	$	283	$	1,245	$	572	Net Income	$	331	$	528	$	954	$	1,245
Other comprehensive income (loss), net of tax
Other comprehensive income, net of tax										Other comprehensive income, net of tax
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature	Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature									Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature
Adjustments and gains (losses) arising during the period	Adjustments and gains (losses) arising during the period	(19)		35		(2)		1		Adjustments and gains (losses) arising during the period	(55)		(19)		(99)		(2)
		(19)		35		(2)		1			(55)		(19)		(99)		(2)
Tax (expense) benefit	Tax (expense) benefit	—		—		—		—		Tax (expense) benefit	—		—		—		—
		(19)		35		(2)		1			(55)		(19)		(99)		(2)
Changes in pension and post-retirement benefits	Changes in pension and post-retirement benefits									Changes in pension and post-retirement benefits
Unrealized gains (losses) arising during the period	Unrealized gains (losses) arising during the period	3		—		61		—		Unrealized gains (losses) arising during the period	20		3		20		61
Reclassification of (gains) losses into Net Income	Reclassification of (gains) losses into Net Income	5		4		16		14		Reclassification of (gains) losses into Net Income	5		5		14		16
		8		4		77		14			25		8		34		77
Tax (expense) benefit	Tax (expense) benefit	(2)		(2)		(19)		(4)		Tax (expense) benefit	(6)		(2)		(8)		(19)
		6		2		58		10			19		6		26		58
Changes in derivative instruments	Changes in derivative instruments									Changes in derivative instruments
Unrealized gains (losses) arising during the period	Unrealized gains (losses) arising during the period	1		(8)		17		(101)		Unrealized gains (losses) arising during the period	42		1		114		17
Reclassification of (gains) losses into Net Income	Reclassification of (gains) losses into Net Income	7		6		15		1		Reclassification of (gains) losses into Net Income	1		7		19		15
		8		(2)		32		(100)			43		8		133		32
Tax (expense) benefit	Tax (expense) benefit	(2)		1		(8)		25		Tax (expense) benefit	(11)		(2)		(33)		(8)
		6		(1)		24		(75)			32		6		100		24

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(7)		36		80		(64)		Other comprehensive income (loss), net of tax	(4)		(7)		27		80
Comprehensive Income (Loss)		$	521	$	319	$	1,325	$	508
Comprehensive Income										Comprehensive Income	$	327	$	521	$	981	$	1,325

See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.									See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)					CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES	YUM! BRANDS, INC. AND SUBSIDIARIES					YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)	(in millions)					(in millions)
		Year to date					Year to date
		9/30/2021		9/30/2020			9/30/2022		9/30/2021
Cash Flows – Operating Activities	Cash Flows – Operating Activities					Cash Flows – Operating Activities
Net Income	Net Income	$	1,245	$	572	Net Income	$	954	$	1,245
Depreciation and amortization	Depreciation and amortization	117		100		Depreciation and amortization	104		117
Impairment and closure expense		2		156

Refranchising (gain) loss	Refranchising (gain) loss	(21)		(30)		Refranchising (gain) loss	(15)		(21)
Investment (income) expense, net	Investment (income) expense, net	(52)		(67)		Investment (income) expense, net	(19)		(52)
Contributions to defined benefit pension plans		(5)		(2)

Deferred income taxes	Deferred income taxes	(173)		(32)		Deferred income taxes	3		(173)
Share-based compensation expense	Share-based compensation expense	58		44		Share-based compensation expense	64		58
Changes in accounts and notes receivable	Changes in accounts and notes receivable	—		46		Changes in accounts and notes receivable	(26)		—
Changes in prepaid expenses and other current assets	Changes in prepaid expenses and other current assets	(5)		11		Changes in prepaid expenses and other current assets	(3)		(5)
Changes in accounts payable and other current liabilities	Changes in accounts payable and other current liabilities	24		105		Changes in accounts payable and other current liabilities	(149)		24
Changes in income taxes payable	Changes in income taxes payable	(45)		(152)		Changes in income taxes payable	(3)		(45)
Other, net	Other, net	147		102		Other, net	65		144
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	1,292		853		Net Cash Provided by Operating Activities	975		1,292

Cash Flows – Investing Activities	Cash Flows – Investing Activities					Cash Flows – Investing Activities
Capital spending	Capital spending	(138)		(99)		Capital spending	(158)		(138)

Acquisition of The Habit Restaurants, Inc., net of cash acquired		—		(408)
Proceeds from sale of investment in Grubhub, Inc. common stock		—		206
Proceeds from refranchising of restaurants	Proceeds from refranchising of restaurants	48		13		Proceeds from refranchising of restaurants	51		48
Other, net	Other, net	(33)		19		Other, net	(5)		(33)
Net Cash Used in Investing Activities		(123)		(269)
Net Cash Used In Investing Activities						Net Cash Used In Investing Activities	(112)		(123)

Cash Flows – Financing Activities	Cash Flows – Financing Activities					Cash Flows – Financing Activities
Proceeds from long-term debt	Proceeds from long-term debt	4,150		1,650		Proceeds from long-term debt	999		4,150
Repayments of long-term debt	Repayments of long-term debt	(3,647)		(1,142)		Repayments of long-term debt	(678)		(3,647)
Revolving credit facility, three months or less, net		—		—
Short-term borrowings by original maturity
More than three months - proceeds		—		85
More than three months - payments		—		(90)
Three months or less, net		—		—

Repurchase shares of Common Stock	Repurchase shares of Common Stock	(857)		—		Repurchase shares of Common Stock	(714)		(857)
Dividends paid on Common Stock	Dividends paid on Common Stock	(446)		(425)		Dividends paid on Common Stock	(489)		(446)
Debt issuance costs	Debt issuance costs	(37)		(20)		Debt issuance costs	(11)		(37)
Other, net	Other, net	(44)		(34)		Other, net	(35)		(44)
Net Cash Provided by (Used in) Financing Activities		(881)		24
Net Cash Used in Financing Activities						Net Cash Used in Financing Activities	(928)		(881)
Effect of Exchange Rates on Cash and Cash Equivalents	Effect of Exchange Rates on Cash and Cash Equivalents	(1)		(1)		Effect of Exchange Rates on Cash and Cash Equivalents	(43)		(1)
Net Increase in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents		287		607
Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents						Net Increase (Decrease) in Cash and Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	(108)		287
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	1,024		768		Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	771		1,024
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	$	1,311	$	1,375	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	$	663	$	1,311



See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.					See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS					CONDENSED CONSOLIDATED BALANCE SHEETS
YUM! BRANDS, INC. AND SUBSIDIARIES	YUM! BRANDS, INC. AND SUBSIDIARIES					YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)	(in millions)					(in millions)
		(Unaudited) 9/30/2021		12/31/2020			(Unaudited) 9/30/2022		12/31/2021
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,001	$	730	Cash and cash equivalents	$	410	$	486
Accounts and notes receivable, net	Accounts and notes receivable, net	548		534		Accounts and notes receivable, net	579		596
Prepaid expenses and other current assets	Prepaid expenses and other current assets	513		425		Prepaid expenses and other current assets	606		450
Total Current Assets	Total Current Assets	2,062		1,689		Total Current Assets	1,595		1,532

Property, plant and equipment, net	Property, plant and equipment, net	1,193		1,235		Property, plant and equipment, net	1,114		1,207
Goodwill	Goodwill	650		597		Goodwill	633		657
Intangible assets, net	Intangible assets, net	361		343		Intangible assets, net	341		359
Other assets	Other assets	1,459		1,435		Other assets	1,429		1,487
Deferred income taxes	Deferred income taxes	694		553		Deferred income taxes	667		724
Total Assets	Total Assets	$	6,419	$	5,852	Total Assets	$	5,779	$	5,966

LIABILITIES AND SHAREHOLDERS’ DEFICIT	LIABILITIES AND SHAREHOLDERS’ DEFICIT					LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable and other current liabilities	Accounts payable and other current liabilities	$	1,265	$	1,189	Accounts payable and other current liabilities	$	1,156	$	1,334
Income taxes payable	Income taxes payable	26		33		Income taxes payable	16		13
Short-term borrowings	Short-term borrowings	64		453		Short-term borrowings	72		68
Total Current Liabilities	Total Current Liabilities	1,355		1,675		Total Current Liabilities	1,244		1,415

Long-term debt	Long-term debt	11,189		10,272		Long-term debt	11,517		11,178
Other liabilities and deferred credits	Other liabilities and deferred credits	1,730		1,796		Other liabilities and deferred credits	1,560		1,746
Total Liabilities	Total Liabilities	14,274		13,743		Total Liabilities	14,321		14,339

Shareholders’ Deficit	Shareholders’ Deficit					Shareholders’ Deficit
Common Stock, no par value, 750 shares authorized; 294 shares issued in 2021 and 300 issued in 2020		—		—
Common Stock, no par value, 750 shares authorized; 284 shares issued in 2022 and 289 issued in 2021						Common Stock, no par value, 750 shares authorized; 284 shares issued in 2022 and 289 issued in 2021	—		—
Accumulated deficit	Accumulated deficit	(7,524)		(7,480)		Accumulated deficit	(8,244)		(8,048)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(331)		(411)		Accumulated other comprehensive loss	(298)		(325)
Total Shareholders’ Deficit	Total Shareholders’ Deficit	(7,855)		(7,891)		Total Shareholders’ Deficit	(8,542)		(8,373)
Total Liabilities and Shareholders’ Deficit	Total Liabilities and Shareholders’ Deficit	$	6,419	$	5,852	Total Liabilities and Shareholders’ Deficit	$	5,779	$	5,966

See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.					See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)	CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)												CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES	YUM! BRANDS, INC. AND SUBSIDIARIES												YUM! BRANDS, INC. AND SUBSIDIARIES
Quarters and years to date ended September 30, 2021 and 2020
Quarters and years to date ended September 30, 2022 and 2021													Quarters and years to date ended September 30, 2022 and 2021
(in millions)	(in millions)												(in millions)
		Yum! Brands, Inc.														Yum! Brands, Inc.
		Issued Common Stock			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders' Deficit					Issued Common Stock				Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders' Deficit
													Shares				Amount
Balance at June 30, 2022													Balance at June 30, 2022			285		$	—		$	(8,274)		$	(294)		$	(8,568)
Net Income													Net Income							331						331
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature													Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature										(55)			(55)
Pension and post-retirement benefit plans (net of tax impact of $6 million)													Pension and post-retirement benefit plans (net of tax impact of $6 million)										19			19
Net gain on derivative instruments (net of tax impact of $11 million)													Net gain on derivative instruments (net of tax impact of $11 million)										32			32
Comprehensive Income													Comprehensive Income													327
Dividends declared													Dividends declared							(162)						(162)
Repurchase of shares of Common Stock													Repurchase of shares of Common Stock			(1)		(18)		(139)						(157)
Employee share-based award exercises													Employee share-based award exercises			—		(3)								(3)
Share-based compensation events													Share-based compensation events					21								21
Balance at September 30, 2022													Balance at September 30, 2022			284		$	—	$	(8,244)		$	(298)		$	(8,542)

Balance at December 31, 2021													Balance at December 31, 2021			289		$	—	$	(8,048)		$	(325)		$	(8,373)
Net Income													Net Income							954						954
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature													Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature										(99)			(99)
Pension and post-retirement benefit plans (net of tax impact of $8 million)													Pension and post-retirement benefit plans (net of tax impact of $8 million)										26			26
Net gain on derivative instruments (net of tax impact of $33 million)													Net gain on derivative instruments (net of tax impact of $33 million)										100			100
Comprehensive Income													Comprehensive Income													981
Dividends declared													Dividends declared							(491)						(491)
Repurchase of shares of Common Stock													Repurchase of shares of Common Stock			(6)		(55)		(659)						(714)
Employee share-based award exercises													Employee share-based award exercises			1		(24)								(24)
Share-based compensation events													Share-based compensation events					79								79

Balance at September 30, 2022													Balance at September 30, 2022			284		$	—	$	(8,244)		$	(298)		$	(8,542)
		Shares	Amount				Accumulated Deficit			Accumulated Other Comprehensive Loss				Total Shareholders' Deficit
Balance at June 30, 2021	Balance at June 30, 2021	296	$	—				Balance at June 30, 2021			296					$	—	$	(7,569)	$	(324)		$	(7,893)
Net Income	Net Income				528										528		Net Income						528						528
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature	Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature							(19)			(19)		Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature										(19)			(19)
Pension and post-retirement benefit plans (net of tax impact of $2 million)	Pension and post-retirement benefit plans (net of tax impact of $2 million)							6			6		Pension and post-retirement benefit plans (net of tax impact of $2 million)										6			6
Net gain on derivative instruments (net of tax impact of $2 million)	Net gain on derivative instruments (net of tax impact of $2 million)							6			6		Net gain on derivative instruments (net of tax impact of $2 million)										6			6
Comprehensive Income	Comprehensive Income										521		Comprehensive Income													521
Dividends declared	Dividends declared				(148)						(148)		Dividends declared							(148)						(148)
Repurchase of shares of Common Stock	Repurchase of shares of Common Stock	(2)	—		(330)						(330)		Repurchase of shares of Common Stock			(2)		—		(330)						(330)
Employee share-based award exercises	Employee share-based award exercises	—	(21)		(5)						(26)		Employee share-based award exercises			—		(21)		(5)						(26)
Share-based compensation events	Share-based compensation events		21								21		Share-based compensation events					21								21

Balance at September 30, 2021	Balance at September 30, 2021	294	$	—	$	(7,524)		$	(331)		$	(7,855)	Balance at September 30, 2021			294		$	—	$	(7,524)		$	(331)		$	(7,855)

Balance at December 31, 2020	Balance at December 31, 2020	300	$	—	$	(7,480)		$	(411)		$	(7,891)	Balance at December 31, 2020			300		$	—	$	(7,480)		$	(411)		$	(7,891)
Net Income	Net Income				1,245						1,245		Net Income							1,245						1,245
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature	Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature							(2)			(2)		Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature										(2)			(2)

Pension and post-retirement benefit plans (net of tax impact of $19 million)	Pension and post-retirement benefit plans (net of tax impact of $19 million)							58			58		Pension and post-retirement benefit plans (net of tax impact of $19 million)										58			58
Net gain on derivative instruments (net of tax impact of $8 million)	Net gain on derivative instruments (net of tax impact of $8 million)							24			24		Net gain on derivative instruments (net of tax impact of $8 million)										24			24
Comprehensive Income	Comprehensive Income										1,325		Comprehensive Income													1,325
Dividends declared	Dividends declared				(448)						(448)		Dividends declared							(448)						(448)
Repurchase of shares of Common Stock	Repurchase of shares of Common Stock	(7)	(24)		(836)						(860)		Repurchase of shares of Common Stock			(7)		(24)		(836)						(860)
Employee share-based award exercises	Employee share-based award exercises	1	(38)		(5)						(43)		Employee share-based award exercises			1		(38)		(5)						(43)
Share-based compensation events	Share-based compensation events		62								62		Share-based compensation events					62								62

Balance at September 30, 2021	Balance at September 30, 2021	294	$	—	$	(7,524)		$	(331)		$	(7,855)	Balance at September 30, 2021			294		$	—	$	(7,524)		$	(331)		$	(7,855)

Balance at June 30, 2020		301	$	11	$	(7,631)		$	(488)		$	(8,108)
Net Income					283						283
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature								35			35
Pension and post-retirement benefit plans (net of tax impact of $2 million)								2			2
Net loss on derivative instruments (net of tax impact of $1 million)								(1)			(1)
Comprehensive Income											319
Dividends declared					(142)						(142)
Repurchase of shares of Common Stock											—
Employee share-based award exercises		1	(3)								(3)
Share-based compensation events			15								15

Balance at September 30, 2020		302	$	23	$	(7,490)		$	(452)		$	(7,919)

Balance at December 31, 2019		300	$	—	$	(7,628)		$	(388)		$	(8,016)
Net Income					572						572
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature								1			1

Pension and post-retirement benefit plans (net of tax impact of $4 million)								10			10
Net loss on derivative instruments (net of tax impact of $25 million)								(75)			(75)
Comprehensive Income											508
Dividends declared					(426)						(426)
Repurchase of shares of Common Stock											—
Employee share-based award exercises		2	(34)								(34)
Share-based compensation events			57								57
Adoption of Expected Credit Loss accounting standard					(8)						(8)
Balance at September 30, 2020		302	$	23	$	(7,490)		$	(452)		$	(7,919)

See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.												See accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions, except per share data)

Note 1 - Financial Statement Presentation

We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements. Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 10-K”).

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of ~~over 52,000~~nearly 54,000 restaurants in more than ~~150~~155 countries and territories. As of September 30, ~~2021,~~2022, 98% of these restaurants were owned and operated by franchisees. The Company’s KFC, Taco Bell and Pizza Hut ~~and Taco Bell~~ brands are global leaders of the chicken, ~~pizza~~Mexican-style and ~~Mexican-style~~pizza food categories, respectively. The Habit Burger Grill ~~a concept we acquired on March 18, 2020,~~ is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

As of September 30, ~~2021,~~2022, YUM consisted of 4four 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 Taco Bell Division which includes our worldwide operations of the Taco Bell~~ 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 3three months. The majority of our U.S. subsidiaries, including, beginning in fiscal year 2022, our Habit Burger Grill Division, and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year ~~consists~~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~~

For fiscal year 2021, our Habit Burger Grill Division ~~operates~~operated on a weekly periodic calendar where each quarter ~~consists~~consisted of 13 ~~weeks, except~~weeks. The impact of this change in ~~fiscal years with 53 weeks when the fourth quarter consists of 14 weeks.~~reporting calendar was not significant and accordingly, prior year amounts presented in these Condensed Consolidated Financial Statements have not been restated.

Our preparation of the accompanying Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our ~~2020~~2021 Form 10-K, the results of the interim periods presented. Our results of operations, comprehensive income, cash flows and changes in shareholders' deficit for these interim periods are not necessarily indicative of the results to be expected for the full year.

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

~~Note 2 - Acquisitions~~We have reclassified certain other items in the Financial Statements for the prior periods to be comparable with the classification for the quarter and year to date ended September 30, 2022. These reclassifications had no effect on previously reported Net Income.

~~Habit Burger Grill Acquisition~~Russia Invasion of Ukraine

~~On March 18, 2020, we completed~~In the ~~acquisition~~first quarter of ~~all~~2022, as a result of the ~~issued~~Russian invasion of Ukraine, we suspended all investment and ~~outstanding common shares~~restaurant development in Russia. We also suspended all operations of ~~The Habit Restaurants, Inc. As 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 acquisition, The Habit Restaurants, Inc. operated 245 company-owned and 31 franchised Habit Burger Grill restaurants across the U.S. and in China, offering a flavor-forward variety of made-to-order items chargrilled over an open flame. We expect Habit Burger Grillinvasion to ~~benefit from the global scale and resources of YUM and that the acquisition will accelerate and diversify YUM's growth.~~humanitarian efforts.

Total cash consideration paid in connection with the acquisition was $408 million, net of acquired cash of $20 million. The acquisition was accounted for as a business combination using the acquisition method of accounting. ~~During the quarter ended March 31, 2021, we finalized our estimate of the fair value of the net assets acquired, which resulted in goodwill being reduced~~

by $15 million compared to the initial fair value estimate recorded in the quarter ended March 31, 2020 ($2 million of this reduction was recorded in the quarter ended March 31, 2021). The final allocation of consideration to the net tangible and intangible assets acquired upon the March 18, 2020 acquisition is presented in the table below.


~~Total Current Assets~~	$	11
~~Property, plant and equipment, net~~	~~111~~
~~Habit Burger Grill brand (included in Intangible assets, net)~~	96
~~Operating lease right-of-use assets (included in Other assets)~~	~~196~~
~~Other assets~~	28
~~Total Assets~~	~~442~~
~~Total Current Liabilities~~	~~(68)~~
~~Operating lease liabilities (included in Other liabilities and deferred credits)~~	~~(170)~~
~~Total Liabilities~~	~~(238)~~
~~Total identifiable net assets~~	~~204~~
~~Goodwill~~	~~204~~
~~Net consideration transferred~~	$	~~408~~

During the ~~first~~second quarter, we completed the transfer of ~~2020,~~ownership of the ~~operations~~Pizza Hut Russia business to a local operator who has initiated the process of ~~substantially all Habit Burger Grill restaurants were impacted by COVID-19. As~~re-branding locations to a non-YUM concept. During the third quarter, we initiated the bidding process for the KFC Russia business and, as a result, ~~we performed an interim impairment test~~those operations qualified for held-for-sale accounting at September 30, 2022. Total KFC Russia assets held-for-sale of ~~the Habit Burger Grill reporting unit goodwill as~~$224 million and total KFC Russia liabilities held-for-sale of ~~March 31, 2020. This test of impairment~~$82 million are included ~~comparing the estimated fair value of the Habit Burger Grill reporting unit to its carrying value, including goodwill, as originally determined through~~in Prepaid expenses and other current assets and Accounts payable and other current liabilities, respectively, in our preliminary purchase price allocation. The fair value estimate of the Habit Burger Grill reporting unit was based on the estimated price a willing buyer would pay for the reporting unit and was determined using an income approach through a discounted cash flow analysis using unobservable inputs (Level 3). The most impactful of these inputs included future average unit volumes of Habit Burger Grill restaurants as well as restaurant unit counts. The fair value was determined based upon a probability-weighted average of three scenarios, which included assumed recovery of Habit Burger Grill average unit volumes to a pre—COVID-19 level over periods ranging from the beginning of 2021 to the end ofCondensed Consolidated Balance Sheet at September 30, 2022. Factors impacting restaurant unit counts were near-term unit closures as the result of COVID-19 as well as the pace of expected new unit development. Unit counts assumed were correlated with the expected recoveries in average unit volumes. Based upon this fair value estimate,At September 30, 2022, we determined ~~that~~ the carrying value of ~~our Habit Burger Grill reporting unit exceeded its fair value. As a result, during~~ the first quarter of 2020 we recorded a goodwill impairment charge of $139 million to Other (income) expense and a corresponding income tax benefit of $32 million. As we continued to refine our preliminary purchase price allocation in the quarter ended September 30, 2020, the impairment chargeKFC Russia asset group was adjusted upward by $5 million, which resulted in a corresponding income tax benefit of $1 million. Subsequent to these 2020 goodwill impairment charges and the finalization during the quarter ended March 31, 2021, of the allocation of consideration to the net assets acquired (described above), the Habit Burger Grill reporting unit goodwill was $60 million.recoverable based on expected sale proceeds.

~~Dragontail Systems Acquisition~~

~~On September 7, 2021,~~In October 2022, we ~~completed~~announced that we have entered into a sale and purchase agreement to transfer ownership of our KFC Russia restaurants, operating system and master franchise rights, including the ~~acquisition~~network of ~~Dragontail Systems Limited (“Dragontail”). The Dragontail acquisition advances our digital capabilities and its AI-based integrated kitchen order management and delivery technologies are intended~~KFC franchised restaurants, to strengthen store operations, enhance the customer experience and make it easier for team members to run a restaurant. Total cash consideration paid in connection with the acquisition was $66 million, net of cash acquired of $3 million. This net consideration has been classified within Other, net cash flows from investing activities within our Condensed Consolidated Statements of Cash Flows.

~~The acquisition was accounted for as~~Smart Service Ltd., a business ~~combination using~~operated by one of our existing KFC franchisees in Russia. Under the ~~acquisition method of accounting. The primary assets recorded as~~agreement, the buyer will be responsible for re-branding locations to a ~~result~~non-YUM concept and retaining the Company's employees in Russia. Completion of the ~~preliminary purchase price allocation were goodwill of $57 million~~transaction is subject to regulatory and amortizable intangible assets of $11 million. The amortizable intangible assets, which consist of software, have an estimated weighted average useful life of 7 years. The goodwill recorded resulted from synergies expected to be achieved through leveraging our scale and resources to enhance these technologies and deploy them globally to our brands and franchisees over time. We anticipate that allgovernmental approvals, as well as other conditions. Following the completion of the ~~goodwill recognized~~transaction, we will ~~be non-deductible for income tax purposes. The purchase price allocation for Dragontail is preliminary and subject to completion of valuation analyses. The final assignment of goodwill to~~have ceased our ~~reporting units has not yet been completed as of the date of these financial statements.~~

~~The financial results of Dragontail have been included~~corporate presence in our Condensed Consolidated Financial Statements since the date of the acquisition but did not significantly impact our results for the quarter or year-to-date periods ended September 30, 2021. The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2020 would not have been significant. The direct transaction costs associated with the acquisition were also not material and were expensed as incurred.Russia.

Note 32 - Earnings Per Common Share (“EPS”)


		Quarter ended				Year to date					Quarter ended				Year to date
		2021		2020		2021		2020			2022		2021		2022		2021
Net Income	Net Income	$	528	$	283	$	1,245	$	572	Net Income	$	331	$	528	$	954	$	1,245

Weighted-average common shares outstanding (for basic calculation)	Weighted-average common shares outstanding (for basic calculation)	296		303		298		302		Weighted-average common shares outstanding (for basic calculation)	285		296		287		298
Effect of dilutive share-based employee compensation	Effect of dilutive share-based employee compensation	6		4		6		5		Effect of dilutive share-based employee compensation	4		6		4		6
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	302		307		304		307		Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	289		302		291		304

Basic EPS	Basic EPS	$	1.78	$	0.94	$	4.17	$	1.89	Basic EPS	$	1.16	$	1.78	$	3.33	$	4.17

Diluted EPS	Diluted EPS	$	1.75	$	0.92	$	4.10	$	1.86	Diluted EPS	$	1.14	$	1.75	$	3.28	$	4.10
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)	Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)	0.1		4.7		1.5		4.6		Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)	2.0		0.1		1.9		1.5

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

Note 43 - Shareholders' Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended September 30, ~~2021~~2022 and ~~2020~~2021 as indicated below. All amounts exclude applicable transaction fees.


		Shares Repurchased (thousands)			Dollar Value of Shares Repurchased					Remaining Dollar Value of Shares that may be Repurchased			Shares Repurchased (thousands)			Dollar Value of Shares Repurchased					Remaining Dollar Value of Shares that may be Repurchased
Authorization Date	Authorization Date	2021		2020	2021			2020		2021		Authorization Date	2022	2021		2022		2021			2022
November 2019	November 2019	4,746		—	$	530		$	—	$	—	November 2019	—	4,746		$	—	$	530		$	—
May 2021	May 2021	2,602		—	330			—		1,670		May 2021	5,987	2,602		714		330			236
September 2022												September 2022	—	—		—		—			2,000
Total	Total	7,348	(a)	—	$	860	(a)	$	—	$	1,670	Total	5,987	7,348	(a)	$	714	$	860	(a)	$	2,236

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

In May 2021, our Board of Directors authorized share repurchases from July 1, 2021 through December 31, 2022, of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock. ~~Unutilized~~As of September 30, 2022, $236 million remains available under this authorization. In September 2022, our Board of Directors authorized share ~~repurchase capacity~~repurchases of ~~$1.2~~up to $2 billion ~~under a November 2019~~(excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024. The new authorization ~~expired on June 30,~~will take effect upon the earlier of the exhaustion or expiration of the authorization approved in May 2021.

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			Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature		Pension and Post-Retirement Benefits		Derivative Instruments		Total
Balance at June 30, 2021, net of tax		$	(165)	$	(44)	$	(115)	$	(324)
Balance at June 30, 2022, net of tax										Balance at June 30, 2022, net of tax	$	(250)	$	(27)	$	(17)	$	(294)

OCI, net of tax	OCI, net of tax									OCI, net of tax

Gains (losses) arising during the period classified into AOCI, net of tax	Gains (losses) arising during the period classified into AOCI, net of tax	(19)		2		—		(17)		Gains (losses) arising during the period classified into AOCI, net of tax	(55)		15		32		(8)

(Gains) losses reclassified from AOCI, net of tax	(Gains) losses reclassified from AOCI, net of tax	—		4		6		10		(Gains) losses reclassified from AOCI, net of tax	—		4		—		4
		(19)		6		6		(7)			(55)		19		32		(4)
Balance at September 30, 2021, net of tax		$	(184)	$	(38)	$	(109)	$	(331)
Balance at September 30, 2022, net of tax										Balance at September 30, 2022, net of tax	$	(305)	$	(8)	$	15	$	(298)

Balance at December 31, 2020, net of tax		$	(182)	$	(96)	$	(133)	$	(411)
Balance at December 31, 2021, net of tax										Balance at December 31, 2021, net of tax	$	(206)	$	(34)	$	(85)	$	(325)

OCI, net of tax	OCI, net of tax									OCI, net of tax

Gains (losses) arising during the period classified into AOCI, net of tax	Gains (losses) arising during the period classified into AOCI, net of tax	(2)		46		12		56		Gains (losses) arising during the period classified into AOCI, net of tax	(99)		15		86		2

(Gains) losses reclassified from AOCI, net of tax	(Gains) losses reclassified from AOCI, net of tax	—		12		12		24		(Gains) losses reclassified from AOCI, net of tax	—		11		14		25
		(2)		58		24		80			(99)		26		100		27
Balance at September 30, 2021, net of tax		$	(184)	$	(38)	$	(109)	$	(331)
Balance at September 30, 2022, net of tax										Balance at September 30, 2022, net of tax	$	(305)	$	(8)	$	15	$	(298)

Note 54 - Other (Income) Expense

Quarter ended Year to date
9/30/2021 9/30/2020 9/30/2021 9/30/2020
Foreign exchange net (gain) loss and other $ (3) $ (6) $ (14) $ (2)
Impairment and closure expense(a)
1 10 2 156
Other (income) expense $ (2) $ 4 $ (12) $ 154

(a) The quarter and year to date ended September 30, 2020, include charges of $5 million and $144 million, respectively, related to the impairment of Habit Burger Grill goodwill. See Note 2. The quarter and year to date ended September 30, 2020 also include charges of $5 million and $11 million, respectively, related to the write-off of software no longer being used.


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

Note 65 - Supplemental Balance Sheet Information

Accounts and Notes Receivable, net

The Company’s receivables are primarily generated from ongoing business relationships with our franchisees as a result of franchise and lease agreements. Trade receivables consisting of royalties from franchisees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable, net in our Condensed Consolidated Balance Sheets. Accounts and notes receivable, net also includes receivables generated from advertising cooperatives that we consolidate.


		9/30/2021		12/31/2020			9/30/2022		12/31/2021
Accounts and notes receivable, gross	Accounts and notes receivable, gross	$	584	$	579	Accounts and notes receivable, gross	$	613	$	632
Allowance for doubtful accounts	Allowance for doubtful accounts	(36)		(45)		Allowance for doubtful accounts	(34)		(36)
Accounts and notes receivable, net	Accounts and notes receivable, net	$	548	$	534	Accounts and notes receivable, net	$	579	$	596

Property, Plant and Equipment, net


		9/30/2021		12/31/2020			9/30/2022		12/31/2021
Property, plant and equipment, gross	Property, plant and equipment, gross	$	2,467	$	2,465	Property, plant and equipment, gross	$	2,376	$	2,477
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(1,274)		(1,230)		Accumulated depreciation and amortization	(1,262)		(1,270)
Property, plant and equipment, net	Property, plant and equipment, net	$	1,193	$	1,235	Property, plant and equipment, net	$	1,114	$	1,207

Assets held-for-sale totaled ~~$27~~$228 million and $7$12 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Liabilities held-for-sale totaled ~~$10~~$82 million as of September 30, ~~2021,~~2022, and are included in Accounts payable and other current liabilities in our Condensed Consolidated Balance ~~Sheet.~~Sheets as of September 30, 2022. KFC Russia assets held-for-sale accounted for $224 million including property, plant and equipment of $69 million, of the $228 million, while KFC Russia liabilities held-for-sale accounted for all of the $82 million as of September 30, 2022.


Other Assets	Other Assets	9/30/2021		12/31/2020		Other Assets	9/30/2022		12/31/2021
Operating lease right-of-use assets(a)	Operating lease right-of-use assets(a)	$	835	$	851	Operating lease right-of-use assets(a)	$	734	$	809

Franchise incentives	Franchise incentives	164		163		Franchise incentives	174		164
Investment in Devyani International Limited (See Note 12)						Investment in Devyani International Limited (See Note 12)	127		118
Other	Other	460		421		Other	394		396
Other assets	Other assets	$	1,459	$	1,435	Other assets	$	1,429	$	1,487

(a) Non-current operating lease liabilities of ~~$811~~$721 million and ~~$823~~$793 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

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


		9/30/2021		12/31/2020			9/30/2022		12/31/2021
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	$	1,001	$	730	Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	$	410	$	486
Restricted cash included in Prepaid expenses and other current assets(a)	Restricted cash included in Prepaid expenses and other current assets(a)	276		258		Restricted cash included in Prepaid expenses and other current assets(a)	178		250
Restricted cash and restricted cash equivalents included in Other assets(b)	Restricted cash and restricted cash equivalents included in Other assets(b)	34		36		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						Cash and restricted cash related to KFC Russia included in assets held-for-sale	41		—
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	$	1,311	$	1,024	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	$	663	$	771

(a) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments.

(b) Primarily trust accounts related to our self-insurance ~~programs.~~program.

Note 76 - Income Taxes


		Quarter ended						Year to date							Quarter ended						Year to date
		2021			2020			2021			2020				2022			2021			2022			2021
Income tax (benefit) provision	Income tax (benefit) provision	$	(77)		$	33		$	22		$	96		Income tax (benefit) provision	$	116		$	(77)		$	281		$	22
Effective tax rate	Effective tax rate	(17.0)		%	10.5		%	1.8		%	14.4		%	Effective tax rate	25.8		%	(17.0)		%	22.7		%	1.8		%

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

•Lapping a $152 million tax ~~benefits~~benefit recorded in the quarter ended September 30, 2021, resulting from a KFC Europe reorganization ~~executed~~ in ~~the quarter ended September 30, 2021. In July 2021,~~which we concentrated management responsibility for European (excluding the United Kingdom ~~(“UK”~~("UK")) KFC franchise development, support ~~operations~~operation and management oversight in Switzerland. Concurrent with this change in management responsibility, we completed intra-entity transfers of certain KFC intellectual property rights from subsidiaries in the UK to subsidiaries in Switzerland. With the transfer of these rights, we

received a step-up in amortizable tax basis to current fair value under applicable Swiss tax ~~law. As a result~~law which resulted in the recording of ~~this transfer, we recorded a net,~~the one-time tax benefit ~~of $152 million~~to record the deferred tax asset.

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

•Higher tax expense recognized in the quarter ended September 30, ~~2020, our effective rate was favorably impacted by $25 million due~~2022, associated with adjustments related to ~~the remeasurement of our deferred tax assets in the UK resulting from an increase in the UK corporate tax rate from 17% to 19% enacted during the quarter.~~prior year taxes.

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

•Our decision to exit the Russia market is anticipated to result in a reduction in the tax ~~benefits resulting from~~basis of intellectual property rights held in Switzerland due to the expected loss of the Russian royalty income associated with such rights going forward. As a result, we have remeasured and reassessed the need for a valuation allowance on those deferred tax assets. In addition, we have reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference will now reverse by way of sale. Primarily as a result of these items, we recorded $69 million of net tax expense in the year to date ended September 30, 2022 associated with our decision to exit the Russia market.

•Lapping a $64 million ~~favorable impact due to the remeasurement of our deferred~~ tax ~~assets~~benefit that was recorded in the ~~UK resulting from an increase in~~quarter ended June 30, 2021, to remeasure deferred taxes necessitated by the enactment of the UK Finance Act 2021. The UK Finance Act increased the UK corporate income tax rate from 19% to 25% ~~enacted during~~, beginning April 1, 2023.

•The items above were partially offset by $82 million of tax benefit discretely recorded in the quarter ended ~~June 30, 2021.~~March 31, 2022, from the release of a valuation allowance on foreign tax credit carryforwards. In January 2022, the U.S. Treasury published new regulations impacting foreign tax credit utilization beginning in the Company’s 2022 tax year. These regulations make foreign taxes paid to certain countries no longer creditable in the U.S. Accordingly, we reversed a valuation allowance associated with existing foreign tax credit carryforwards that we now believe will be used to offset these now non-creditable taxes in 2022 and future years.

Note 87 - Revenue Recognition

Disaggregation of Total Revenues

The following tables disaggregate revenue by Concept, for our two most significant markets based on Operating Profit and for all other markets. We believe this disaggregation best reflects the extent to which the nature, amount, timing and uncertainty of our revenues and cash flows are impacted by economic factors.


		Quarter ended 9/30/2021												Quarter ended 9/30/2022
			KFC Division		Pizza Hut Division		Taco Bell Division		Habit Burger Grill Division		Total				KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.	U.S.												U.S.
Company sales	Company sales		$	15	$	5	$	225	$	132	$	377	Company sales		$	16	$	234	$	4	$	129	$	383
Franchise revenues	Franchise revenues		46		63		156		1		266		Franchise revenues		47		173		65		—		285
Property revenues	Property revenues		3		2		11		—		16		Property revenues		4		10		1		1		16
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services		7		70		130		—		207		Franchise contributions for advertising and other services		7		136		72		1		216

China	China												China
Franchise revenues	Franchise revenues		61		16		—		—		77		Franchise revenues		61		—		17		—		78

Other	Other												Other
Company sales	Company sales		128		8		—		—		136		Company sales		96		—		—		—		96
Franchise revenues	Franchise revenues		265		66		10		—		341		Franchise revenues		291		13		62		—		366
Property revenues	Property revenues		16		—		—		—		16		Property revenues		15		—		—		—		15
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services		151		17		2		—		170		Franchise contributions for advertising and other services		167		2		16		—		185
			$	692	$	247	$	534	$	133	$	1,606			$	704	$	568	$	237	$	131	$	1,640

Quarter ended 9/30/2020
KFC Division Pizza Hut Division Taco Bell Division Habit Burger Grill Division Total
U.S.
Company sales $ 14 $ 5 $ 218 $ 118 $ 355
Franchise revenues 44 62 148 — 254
Property revenues 4 1 10 — 15
Franchise contributions for advertising and other services 4 76 117 — 197
China
Franchise revenues 56 15 — — 71
Other
Company sales 116 15 — — 131
Franchise revenues 219 55 7 — 281
Property revenues 17 1 — — 18
Franchise contributions for advertising and other services 112 13 1 — 126
$ 586 $ 243 $ 501 $ 118 $ 1,448

Year to date 9/30/2021
KFC Division Pizza Hut Division Taco Bell Division Habit Burger Grill Division Total
U.S.
Company sales $ 45 $ 15 $ 656 $ 391 $ 1,107
Franchise revenues 138 197 460 3 798
Property revenues 10 4 31 — 45
Franchise contributions for advertising and other services 20 223 375 — 618
China
Franchise revenues 181 48 — — 229
Other
Company sales 378 24 — — 402
Franchise revenues 750 185 27 — 962
Property revenues 45 1 — — 46
Franchise contributions for advertising and other services 432 50 5 — 487
$ 1,999 $ 747 $ 1,554 $ 394 $ 4,694


	Quarter ended 9/30/2021
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales	$	15	$	225	$	5	$	132	$	377
Franchise revenues	46		156		63		1		266
Property revenues	3		11		2		—		16
Franchise contributions for advertising and other services	7		130		70		—		207

China
Franchise revenues	61		—		16		—		77

Other
Company sales	128		—		8		—		136
Franchise revenues	265		10		66		—		341
Property revenues	16		—		—		—		16
Franchise contributions for advertising and other services	151		2		17		—		170
	$	692	$	534	$	247	$	133	$	1,606

Year to date 9/30/2020
KFC Division Pizza Hut Division Taco Bell Division Habit Burger Grill Division Total
U.S.
Company sales $ 43 $ 15 $ 610 $ 231 $ 899
Franchise revenues 126 190 411 1 728
Property revenues 11 4 31 — 46
Franchise contributions for advertising and other services 13 224 331 — 568
China
Franchise revenues 150 37 — — 187
Other
Company sales 303 42 — — 345
Franchise revenues 577 160 18 — 755
Property revenues 42 2 — — 44
Franchise contributions for advertising and other services 296 39 2 — 337
$ 1,561 $ 713 $ 1,403 $ 232 $ 3,909


	Year to date 9/30/2022
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	47	$	691	$	14	$	390	$	1,142
Franchise revenues		139		508		193		3		843
Property revenues		10		31		3		1		45
Franchise contributions for advertising and other services		20		401		216		1		638

China
Franchise revenues		170		—		46		—		216

Other
Company sales		306		—		—		—		306
Franchise revenues		834		35		195		—		1,064
Property revenues		42		—		1		—		43
Franchise contributions for advertising and other services		473		5		48		—		526
		$	2,041	$	1,671	$	716	$	395	$	4,823


	Year to date 9/30/2021
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger Grill Division		Total
U.S.
Company sales		$	45	$	656	$	15	$	391	$	1,107
Franchise revenues		138		460		197		3		798
Property revenues		10		31		4		—		45
Franchise contributions for advertising and other services		20		375		223		—		618

China
Franchise revenues		181		—		48		—		229

Other
Company sales		378		—		24		—		402
Franchise revenues		750		27		185		—		962
Property revenues		45		—		1		—		46
Franchise contributions for advertising and other services		432		5		50		—		487
		$	1,999	$	1,554	$	747	$	394	$	4,694

Contract Liabilities

Our contract liabilities are comprised of unamortized upfront fees received from ~~franchisees.~~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 ~~2021~~2022 is presented below.


	Deferred Franchise Fees
Balance at December 31, ~~2020~~2021	$	~~415~~421
Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period	~~(53)~~(57)
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period	52 65
Deferred franchise fees related to KFC Russia reclassified to liabilities held-for-sale	(20)
Other(a)	~~(3)~~(5)
Balance at September 30, ~~2021~~2022	$	~~411~~404

(a) Primarily includes impact of foreign currency translation.

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


Less than 1 year	$	6663
1 - 2 years	60
2 - 3 years	5654
3 - 4 years	49
4 - 5 years	43
Thereafter	~~137~~135
Total	$	~~411~~404

Note 98 - Reportable Operating Segments

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


		Quarter ended				Year to date					Quarter ended				Year to date
Revenues	Revenues	2021		2020		2021		2020		Revenues	2022		2021		2022		2021
KFC Division	KFC Division	$	692	$	586	$	1,999	$	1,561	KFC Division	$	704	$	692	$	2,041	$	1,999
Taco Bell Division										Taco Bell Division	568		534		1,671		1,554
Pizza Hut Division	Pizza Hut Division	247		243		747		713		Pizza Hut Division	237		247		716		747
Taco Bell Division		534		501		1,554		1,403
Habit Burger Grill Division	Habit Burger Grill Division	133		118		394		232		Habit Burger Grill Division	131		133		395		394
		$	1,606	$	1,448	$	4,694	$	3,909		$	1,640	$	1,606	$	4,823	$	4,694


		Quarter ended				Year to date					Quarter ended				Year to date
Operating Profit	Operating Profit	2021		2020		2021		2020		Operating Profit	2022		2021		2022		2021
KFC Division	KFC Division	$	314	$	278	$	932	$	655	KFC Division	$	304	$	314	$	888	$	932
Taco Bell Division										Taco Bell Division	204		184		604		560
Pizza Hut Division	Pizza Hut Division	101		89		306		252		Pizza Hut Division	92		101		287		306
Taco Bell Division		184		186		560		484
Habit Burger Grill Division	Habit Burger Grill Division	1		(7)		6		(15)		Habit Burger Grill Division	(4)		1		(14)		6
Corporate and unallocated G&A expenses(a)	Corporate and unallocated G&A expenses(a)	(70)		(81)		(183)		(229)		Corporate and unallocated G&A expenses(a)	(67)		(70)		(203)		(183)
Unallocated Company restaurant expenses		—		1		—		—

Unallocated Franchise and property expenses(a)	Unallocated Franchise and property expenses(a)	—		—		—		(3)		Unallocated Franchise and property expenses(a)	—		—		(4)		—
Unallocated Refranchising gain (loss)	Unallocated Refranchising gain (loss)	(1)		9		21		30		Unallocated Refranchising gain (loss)	3		(1)		15		21
Unallocated Other income (expense)~~(b)~~(a)	Unallocated Other income (expense)~~(b)~~(a)	(2)		(4)		(5)		(153)		Unallocated Other income (expense)~~(b)~~(a)	14		(2)		36		(5)
Operating Profit	Operating Profit	$	527	$	471	$	1,637	$	1,021	Operating Profit	$	546	$	527	$	1,609	$	1,637
Investment income (expense), net(c)		51		10		52		67
Investment income (expense), net(b)										Investment income (expense), net(b)	27		51		19		52
Other pension income (expense)	Other pension income (expense)	(1)		(4)		(6)		(9)		Other pension income (expense)	(2)		(1)		(3)		(6)
Interest expense, net~~(d)~~(c)	Interest expense, net~~(d)~~(c)	(126)		(161)		(416)		(411)		Interest expense, net~~(d)~~(c)	(124)		(126)		(390)		(416)
Income before income taxes	Income before income taxes	$	451	$	316	$	1,267	$	668	Income before income taxes	$	447	$	451	$	1,235	$	1,267

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)Includes charges 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. We recorded charges of $4 million and $32 million during the quarters ended September 30, 2021 and 2020, respectively,Our operating results for ~~this program. We recorded charges of $7 million and $32 million during the years to date ended September 30, 2021 and 2020, respectively, for this program. Also included in~~ the year to date ended September 30, ~~2020, is~~2022, continue to reflect royalty revenues from and expenses to support the Russian operations for Pizza Hut prior to the date of transfer and for KFC for the entire quarter and year to date (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 have reclassed such net operating profits from the Division segment results in which they were earned to Corporate and unallocated Other income (expense). As a ~~$50 million charitable contribution to Yum! Brands Foundation, Inc. (a standalone, not-for-profit organization that is not consolidated in the Company's results) in the second quarter~~result, we reclassed net operating profits of ~~2020 related to our “Unlocking Opportunity Initiative” and costs related to our acquisition of Habit Burger Grill of $9 million.~~

~~(b)Includes charges of $5~~$18 million and ~~$144~~$44 million infrom KFC and Pizza Hut Other income (expense) to Unallocated Other (income) expense during the quarter and year to date ended September 30, ~~2020, respectively, related to the impairment of Habit Burger Grill goodwill. See Note 2.~~2022, respectively.

Additionally, we have incurred certain expenses related to the transfer of the businesses and other one-time costs related to our exit from Russia which we have recorded within Corporate and unallocated. As a result of these other costs and expenses we have incurred, we recorded charges of $1 million to Corporate and unallocated G&A expenses and less than $1 million to Unallocated Franchise and property expenses during the quarter ended September 30, 2022. During the year to date ended September 30, 2022, we recorded charges of $3 million to Corporate and unallocated G&A expenses and $4 million to Unallocated Franchise and property expenses.

~~(c)~~

(b)Includes changes in the value of our investment in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India. During the quarter ended September 30, 2021, Devyani executed an initial public offering and subsequently the fair value of our investment became readily determinable. As a result, we began recording changes in fair value in Investment income (expense), net. In the quarter ended September 30, 2021, we recognized pre-tax investment income of $52 million related to changes in fair value of our investment in Devyani. See(see Note ~~13.~~12).

Also includes changes in the value of Grubhub, Inc. (“Grubhub”) common stock. For the quarter and year to date ended September 30, 2020, we recognized pre-tax investment income of $8 million and $69 million, respectively, related to changes in fair value of our investment in Grubhub common stock. In the quarter ended September 30, 2020, we sold our investment in Grubhub.

~~(d)~~(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 (see Note 10) during the quarter ended June 30, 2022. Includes a $28 million call premium and $6 million of unamortized debt issuance costs written off related to the redemption of the $1,050 million aggregate principal amount of 5.25% Subsidiary Senior Unsecured Notes due in 2026 ~~Notes~~ during the ~~year to date~~quarter ended ~~September~~June 30, 2021. ~~See Note 11.~~

~~Also includes a $26 million call premium~~Includes fees expensed and ~~$6 million of~~ unamortized debt issuance costs written off ~~associated with~~totaling $12 million related to the ~~early redemption of YUM Subsidiary Senior Unsecured Notes due in 2024 as well as $2 million of accrued and unpaid interest associated with the period of time from prepayment~~refinancing of the ~~notes with the trustee to their redemption date~~Credit Agreement (as described within our 2021 Form 10-K) during the quarter ~~and year to date~~ ended ~~September 30, 2020.~~March 31, 2021.

Note 109 - 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~~”“Plan”), is funded. We fund our other U.S. ~~plan~~plans as benefits are paid. The Plan and our non-qualified ~~plan~~plans in the U.S. are currently closed to new salaried and hourly participants.

The components of net periodic benefit cost associated with our U.S. pension plans are as follows:


		Quarter ended				Year to date					Quarter ended				Year to date
		2021		2020		2021		2020			2022		2021		2022		2021
Service cost	Service cost	$	2	$	2	$	6	$	6	Service cost	$	2	$	2	$	5	$	6
Interest cost	Interest cost	8		9		24		26		Interest cost	8		8		24		24
Expected return on plan assets	Expected return on plan assets	(11)		(10)		(32)		(32)		Expected return on plan assets	(11)		(11)		(34)		(32)
Amortization of net loss	Amortization of net loss	3		4		12		11		Amortization of net loss	3		3		8		12
Amortization of prior service cost	Amortization of prior service cost	1		—		4		3		Amortization of prior service cost	1		1		4		4
Net periodic benefit cost	Net periodic benefit cost	$	3	$	5	$	14	$	14	Net periodic benefit cost	$	3	$	3	$	7	$	14

Additional loss recognized due to settlements(a)										Additional loss recognized due to settlements(a)	$	2	$	—	$	2	$	—

(a) Loss is a result of settlement transactions which exceeded the sum of annual service and interest costs for the applicable plan. This loss was recorded in Other pension (income) expense.

Note 1110 - Short-term Borrowings and Long-term Debt


Short-term Borrowings	Short-term Borrowings	9/30/2021		12/31/2020		Short-term Borrowings	9/30/2022		12/31/2021
Current maturities of long-term debt	Current maturities of long-term debt	$	71	$	463	Current maturities of long-term debt	$	79	$	75
Less current portion of debt issuance costs and discounts	Less current portion of debt issuance costs and discounts	(7)		(10)		Less current portion of debt issuance costs and discounts	(7)		(7)
Short-term borrowings	Short-term borrowings	$	64	$	453	Short-term borrowings	$	72	$	68

Long-term Debt	Long-term Debt					Long-term Debt
Securitization Notes	Securitization Notes	$	3,815	$	2,869	Securitization Notes	$	3,782	$	3,811
Subsidiary Senior Unsecured Notes	Subsidiary Senior Unsecured Notes	750		1,800		Subsidiary Senior Unsecured Notes	750		750

Term Loan A Facility	Term Loan A Facility	750		431		Term Loan A Facility	741		750
Term Loan B Facility	Term Loan B Facility	1,493		1,916		Term Loan B Facility	1,478		1,489
YUM Senior Unsecured Notes	YUM Senior Unsecured Notes	4,475		3,725		YUM Senior Unsecured Notes	4,875		4,475
Finance lease obligations	Finance lease obligations	67		72		Finance lease obligations	54		64
		$	11,350	$	10,813		$	11,680	$	11,339
Less debt issuance costs and discounts		(90)		(78)
Less long-term portion of debt issuance costs and discounts						Less long-term portion of debt issuance costs and discounts	(84)		(86)
Less current maturities of long-term debt	Less current maturities of long-term debt	(71)		(463)		Less current maturities of long-term debt	(79)		(75)
Long-term debt	Long-term debt	$	11,189	$	10,272	Long-term debt	$	11,517	$	11,178

Details of our Short-term borrowings and Long-term debt as of December 31, ~~2020~~2021 can be found within our ~~2020~~2021 Form 10-K.

On ~~March 15, 2021, KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell~~February 23, 2022, Yum! Brands, Inc. issued a notice of ~~America, LLC (collectively,~~redemption for the ~~“Borrowers”), each~~$600 million aggregate principal amount of which is a wholly-owned subsidiary of the Company, completed the refinancing of the then existing $1.9 billion term loan B facility, $431 million term loan A facility and $1.0 billion revolving facility through the issuance of a $1.5 billion term loan B facility maturing March 15, 20287.75% YUM Senior Unsecured Notes due April 1, 2025 (the ~~“Term Loan B Facility”~~“2025 Notes”), a $750 million term loan A facility maturing March 15, 2026 (the “Term Loan A Facility”) and a $1.25 billion revolving facility maturing March 15, 2026 (the “Revolving Facility”) pursuant to an amendment to the Credit Agreement (as defined in our 2020 Form 10-K). The amendment reduces the interest rate currently applicable to the refinanced Term Loan A Facility and for borrowings under the refinanced Revolving Facility by 25 basis points. Subsequent to the refinance the interest rate applicable to the Term Loan A Facility and the Revolving Facility ranges from 0.75% to 1.50% plus LIBOR or from 0.00% to 0.50% plus the Base Rate,2025 Notes were redeemed on April 1, 2022, at ~~the Borrowers' election, based on the total leverage ratio (as defined in the Credit Agreement).~~

~~The refinanced Term Loan A Facility is now subject to quarterly amortization payments in~~ an amount equal to ~~0.625%~~103.875% of the aggregate principal amount of the ~~facility as~~2025 Notes, reflecting a $23 million call premium, plus accrued and unpaid interest to the date of redemption. We recognized the ~~refinance date beginning with~~call premium and the ~~second quarter~~write-off of 2022. The Term Loan A Facility quarterly amortization payments increase to 1.25% of the principal amount of the facility as of the refinance date beginning with the second quarter of 2024. The Term Loan B Facility continues to be subject to quarterly amortization payments in an amount equal to 0.25% of the principal amount of the facility as of the refinance date. All other material provisions under the Credit Agreement remain unchanged. Our Revolving Facility was undrawn as of September 30, 2021.

~~As a result of this Credit Agreement refinancing, $8~~$5 million of fees were capitalized as debt issuance costs, $3 million of which were paid directly to lenders. The debt issuance costs will be amortized to Interest expense, net through the contractual maturities of the Credit Agreement using the effective interest method. During the quarter ended March 31, 2021, fees expensed of $4 million as well as previously recorded unamortized debt issuance costs ~~written off of $8 million were recognized~~associated with the 2025 Notes within Interest expense, net ~~due to this refinancing.~~in the quarter ended June 30, 2022.

OnAlso on April 1, ~~2021,~~2022, Yum! Brands, Inc. issued ~~$1.1~~$1 billion aggregate principal amount of ~~4.625%~~5.375% YUM Senior Unsecured Notes due ~~January 31,~~April 1, 2032 (the ~~“2032~~“April 2032 Notes”). Interest on the April 2032 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, ~~2021.~~2022. The indenture governing the April 2032 Notes contains covenants and events of default that are customary for debt securities of this type, including cross-default provisions whereby the acceleration of the maturity of any of our indebtedness in a principal amount of $100 million or more or the failure to pay the principal of such indebtedness at its stated maturity will constitute an event of default under the April 2032 Notes unless such indebtedness is discharged, or the acceleration of the maturity of that indebtedness is annulled, within 30 days after notice. The Company paid debt issuance costs of ~~$13~~$12 million in connection with the April 2032 Notes. The debt issuance costs will be amortized to Interest expense, net over the life of the April 2032 Notes using the effective interest method. We used the net proceeds from the April 2032 Notes to fund the redemption of the ~~2026~~2025 Notes discussed ~~below.~~

On April 23, 2021, the Borrowers issued a notice of redemption for June 1, 2021 for $1,050 million aggregate principal amount of 5.25% Subsidiary Senior Unsecured Notes due in 2026 (the “2026 Notes”). The redemption amount was equal to 102.625% of the $1,050 million aggregate principal amount redeemed, reflecting a $28 million “call premium”. We recognized the call premiumabove and ~~the write-off of $6 million of unamortized debt issuance costs associated with the 2026 Notes within Interest expense, net in the quarter ended June 30, 2021.~~

On June 30, 2021, Yum! Brands, Inc. issued a notice of redemption for $350 million aggregate principal amount of 3.75% YUM Senior Unsecured Notes due November 1, 2021 (the “2021 Notes”). The redemption, which occurred on August 2, 2021, was in an amount equal to 100% of the principal amount of the 2021 Notes, plus accrued interest to the date of redemption.

~~On August 19, 2021, Taco Bell Funding, LLC (the “Issuer”), a special purpose limited liability company and a direct, wholly-owned subsidiary of Taco Bell Corp. (“TBC”),~~ ~~completed a refinancing transaction and~~ issued $900 million of its Series 2021-1 1.946% Fixed Rate Senior Secured Notes, Class A-2-I (the “2021 Class A-2-I Notes”), $600 million of its Series 2021-1 2.294% Fixed Rate Senior Secured Notes, Class A-2-II (the “2021 Class A-2-II Notes”) and $750 million of its Series 2021-1 2.542% Fixed Rate Senior Secured Notes, Class A-2-III (the “2021 Class A-2-III Notes” and, together with the 2021 Class A-2-I Notes and the 2021 Class A-2-II Notes, the “2021 Class A-2 Notes”). The net proceeds from the issuance of the 2021 Class A-2 Notes were used to repay in full the 2016-1 Class A-2-II Notes of $480 million and 2018-1 Class A-2-I Notes of $804 million. The remaining net proceeds were distributed to TBC to pay certain transaction-related expenses, for general corporate purposes and to return capital to shareholders of the Company. The remaining 2016-1 Class A-2-III Notes of $957 million and 2018-1 Class A-2-II Notes of $608 million, together with the 2021 Class A-2 Notes are collectively referred to as the “Securitization Notes”.

The legal final maturity date of the 2021 Class A-2 Notes is in August 2051. However, the anticipated repayment dates of the 2021 Class A-2-I Notes, the 2021 Class A-2-II Notes and the 2021 Class A-2-III Notes are approximately 6, 8 and 10 years (the “Anticipated Repayment Dates”), respectively, from the date of issuance. If the Issuer has not repaid or refinanced a series of Securitization Notes prior to its respective Anticipated Repayment Dates, rapid amortization of principal on all Securitization Notes will occur and additional interest will accrue on the Securitization Notes, as provided in the Indenture for the Securitization Notes.

As a result of the issuance of the 2021 Class A-2 Notes, $19 million of fees were capitalized as debt issuance costs. The debt issuance costs are being amortized to Interest expense, net through the Anticipated Repayment Dates of the Securitization Notes utilizing the effective interest rate method. As of September 30, 2021, the effective interest rates, including the amortization of debt issuance costs, were 2.11%, 2.42% and 2.64% for the 2021 Class A-2-I Notes, 2021 Class A-2-II Notes and 2021 Class A-2-III Notes, respectively. During the quarter ended September 30, 2021, previously recorded unamortized debt issuance costs written off totaling approximately $5 million were recognized within Interest expense, net due to the extinguishment of the 2016 Class A-2-II Notes and 2018 Class A-2-I Notes.purposes.

Excluding the ~~payments~~amounts associated with the extinguishment of the ~~2026~~2025 Notes discussed above, cash paid for interest during the year to date ended September 30, ~~2021~~2022, was ~~$328~~$341 million. Excluding ~~$28~~$12 million ~~of call premium and interest~~ associated with the ~~period of time from prepayment to redemption~~Credit Agreement refinancing and $34 million associated with the extinguishment of ~~$1,050 million aggregate principal amount of 5.00% Subsidiary Senior Unsecured~~the 2026 Notes ~~due~~(as discussed in ~~2024,~~our 2021 Form 10-K), cash paid for interest during the year to date ended September 30, ~~2020~~2021, was ~~$329~~$328 million.

Note 1211 - 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 is currently not significant.

Interest Rate Swaps

We have entered into interest rate swaps, with the objective of reducing our exposure to interest rate risk for a portion of our variable-rate debt interest payments primarily under our Term Loan B Facility. At both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had interest rate swaps expiring in March 2025 with notional amounts of $1.5 ~~billion. At December 31, 2020, we also had interest rate swaps that expired in July 2021 with notional amounts of $1.55~~ billion. These interest rate swaps have been designated cash flow hedges as the changes in the future cash flows of the swaps are expected to offset changes in

expected future interest payments on the related variable-rate debt. There were no other interest rate swaps outstanding as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Gains or losses on the interest rate swaps are reported as a component of AOCI and reclassified into Interest expense, net in our Condensed Consolidated Statements of Income in the same period or periods during which the related hedged interest payments affect earnings. Through September 30, ~~2021,~~2022, the swaps were highly effective cash flow hedges.

~~Foreign Currency Contracts~~

We have entered into foreign currency forward and swap contracts with the objective of reducing our exposure to earnings volatility arising from foreign currency fluctuations associated with certain foreign currency denominated intercompany receivables and payables. The notional amount, maturity date, and currency of these contracts match those of the underlying intercompany receivables or payables. Our foreign currency contracts are designated cash flow hedges as the future cash flows of the contracts are expected to offset changes in intercompany receivables and payables due to foreign currency exchange rate fluctuations.

Gains or losses on the foreign currency contracts are reported as a component of AOCI. Amounts are reclassified from AOCI each quarter to offset foreign currency transaction gains or losses recorded within Other (income) expense when the related intercompany receivables and payables affect earnings due to their functional currency remeasurements. Through September 30, 2021, all foreign currency contracts related to intercompany receivables and payables were highly effective cash flow hedges.

As of September 30, 2021 and December 31, 2020, outstanding foreign currency contracts related to intercompany receivables and payables had total notional amounts of $34 million and $39 million, respectively. These foreign currency forward contracts all have durations that expire in 2021.

As a result of the use of interest rate swaps, ~~and foreign currency contracts,~~ the Company is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with major financial institutions carefully selected based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At September 30, ~~2021,~~2022, all of the counterparties to our interest rate swaps ~~and foreign currency contracts~~ had investment grade ratings according to the three major ratings agencies. To date, all counterparties have performed in accordance with their contractual obligations.

Gains and losses on ~~derivative instruments designated as cash flow hedges~~these interest rate swaps recognized in OCI and reclassifications from AOCI into Net ~~Income:~~Income were as follows:


		Quarter ended								Year to date									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					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
		2021		2020		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021		2022		2021

Interest rate swaps	Interest rate swaps	$	—	$	(6)	$	9	$	4	$	17	$	(104)	$	17	$	6	Interest rate swaps	$	40	$	—	$	3	$	9	$	111	$	17	$	23	$	17

Foreign currency contracts		1		(2)		(2)		2		—		3		(2)		(5)

Income tax benefit/(expense)	Income tax benefit/(expense)	(1)		2		(1)		(1)		(5)		25		(3)		—		Income tax benefit/(expense)	(10)		(1)		(1)		(1)		(27)		(5)		(6)		(3)

As of September 30, ~~2021,~~2022, the estimated net ~~loss~~gain included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is ~~$43~~$19 million, based on current LIBOR interest rates.

Total Return Swaps

~~Beginning in 2021, we~~We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our Executive Income Deferral (“EID”) plan. While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes. As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities. The fair value associated with the total return swaps as of both September 30, 2022 and December 31, 2021, was not significant.

See Note 1312 for the fair value of our derivative assets and liabilities.

Note 1312 - Fair Value Disclosures

As of September 30, ~~2021,~~2022, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these instruments. The fair value of our notes receivable, net of allowances, and lease guarantees, less reserves for expected losses, approximates their carrying value. The following table presents the carrying value and estimated fair value of the Company’s debt obligations:

9/30/2021 12/31/2020
Carrying Value Fair Value (Level 2) Carrying Value Fair Value (Level 2)
Securitization Notes(a)
$ 3,815 $ 3,921 $ 2,869 $ 3,015
Subsidiary Senior Unsecured Notes(b)
750 796 1,800 1,890
Term Loan A Facility(b)
750 751 431 428
Term Loan B Facility(b)
1,493 1,495 1,916 1,907
YUM Senior Unsecured Notes(b)
4,475 4,877 3,725 4,094


	9/30/2022				12/31/2021
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)

Securitization Notes(a)	$	3,782	$	3,429	$	3,811	$	3,872
Subsidiary Senior Unsecured Notes(b)	750		708		750		784
Term Loan A Facility(b)	741		728		750		748
Term Loan B Facility(b)	1,478		1,467		1,489		1,490
YUM Senior Unsecured Notes(b)	4,875		4,277		4,475		4,845

(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 ~~foreign currency contracts~~ and other investments, all of which are required to be measured at fair value on a recurring basis (see Note 1211 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							Fair Value
		Condensed Consolidated Balance Sheet	Level	9/30/2021		12/31/2020			Condensed Consolidated Balance Sheet	Level	9/30/2022		12/31/2021
Assets	Assets							Assets
Foreign Currency Contracts		Prepaid expenses and other current assets	2	$	1	$	1
Other Investments	Other Investments	Other assets	1	85		45		Other Investments	Other assets	1	$	128	$	119

Other Investments								Other Investments	Other assets	3	5		5
Interest Rate Swaps								Interest Rate Swaps	Prepaid expenses and other current assets	2	19		—
Interest Rate Swaps								Interest Rate Swaps	Other assets	2	23		—

Liabilities	Liabilities							Liabilities
Interest Rate Swaps	Interest Rate Swaps	Accounts payable and other current liabilities	2	44		28		Interest Rate Swaps	Accounts payable and other current liabilities	2	—		38
Interest Rate Swaps	Interest Rate Swaps	Other liabilities and deferred credits	2	77		127		Interest Rate Swaps	Other liabilities and deferred credits	2	—		54

The fair value of the Company’s interest rate swaps ~~and foreign currency contracts~~ 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.

The other investments ~~as of September 30, 2021,~~ primarily include ~~an approximate 5%~~a minority interest in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India, with a fair value of ~~$83 million. The minority interest was received in lieu of cash proceeds upon the refranchising of~~Indian Rupee 10.3 billion (or approximately ~~60 KFC restaurants in India. At the time of the refranchisings, the fair value of this minority interest was estimated to be~~$127 million) and Indian Rupee 8.8 billion (or approximately ~~$31 million. During the quarter ended~~$118 million) at September 30, 2022 and December 31, 2021, Devyani executed an initial public offering and subsequently the fair value of these equity securities became readily determinable. As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net. Prior to the initial public offering the fair value of these equity securities was not readily determinable and we applied the measurement alternative in accordance with ASC Topic 321.respectively. For ~~both~~ the quarter and year to date ended September 30, ~~2021,~~2022, we recognized pre-tax investment ~~income~~gains of ~~$52 million~~Indian Rupee 2.1 billion (or approximately $27 million) and Indian Rupee 1.6 billion (or approximately $20 million), respectively, related to changes in fair value of our investment in Devyani.

The other investments as of December 31, 2020, primarily include investments in mutual funds, which were historically used to offset fluctuations for a portion of our EID liabilities and whose fair values were determined based on the closing market prices of the respective mutual funds. In the quarter ended March 31, 2021, upon entering into the total return swaps as disclosed in Note 12, we sold the majority of these other investments and received cash proceeds of $44 million. These proceeds have been classified within Other, net cash flows from investing activities within our Condensed Consolidated Statements of Cash Flows.

Note 1413 - Contingencies

Internal Revenue Service Proposed Adjustment

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, ~~on October 13, 2021,~~in August 2022, we received a ~~Notice of Proposed Adjustment~~Revenue Agent’s Report (“~~NPA”~~RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal ~~year relating~~year. Additionally, interest on the underpayment is estimated to be approximately $740 million through the third quarter of 2022. 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 ~~reorganizations involved~~transactions resulted in taxable distributions of approximately $6.0 billion. We expect to receive the Revenue Agent’s Report (“RAR”) including the IRS’s calculation of the tax assessment in early 2022. The amount of additional tax that may be asserted by the IRS in the RAR cannot be quantified at this time; however, based on the NPA, the amount of additional tax to be proposed is expected to be material.

We disagree with the IRS’s position as asserted in the ~~NPA~~RAR and intend to contest ~~it vigorously by filing~~that position vigorously. In September 2022, we filed a ~~protest~~Protest with the IRS Examination Division disputing on multiple grounds ~~any~~the proposed ~~taxes~~underpayment of tax and ~~proceeding~~penalties.We are awaiting the IRS Examination Division’s Rebuttal to our Protest.When that Rebuttal is filed we intend to pursue independent review by the IRS Office of Appeals.

The ~~final~~Company does not expect resolution of this matter ~~is uncertain, but~~within twelve months and cannot predict with certainty the timing of such resolution. The Company believes that it is more likely than not the Company’s tax position will be sustained; therefore, no reserve is recorded with respect to this matter.

An unfavorable resolution of this matter could have a material, adverse impact on our consolidated Financial Statements in future periods.

Lease Guarantees

As a result of having assigned our interest in obligations under real estate leases as a condition to the refranchising of certain Company-owned restaurants, and guaranteeing certain other leases, we are frequently secondarily liable on lease agreements. These leases have varying terms, the latest of which expires in 2065. As of September 30, ~~2021,~~2022, 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~~$375 million. The present value of these potential payments discounted at our pre-tax cost of debt at September 30, ~~2021,~~2022, was approximately ~~$350~~$300 million. Our franchisees are the primary lessees under the vast majority of these leases. We generally have cross-default provisions with these franchisees that would put them in default of their franchise agreement in the event of non-payment under the lease. We believe these cross-default provisions significantly reduce the risk that we will be required to make payments under these leases, although such risk may not be reduced in the context of a bankruptcy or other similar restructuring of a large franchisee or group of franchisees. The liability recorded for our expected losses under such leases as of September 30, ~~2021,~~2022, 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~~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 ~~$150~~$135 million. Of this amount, ~~$145~~$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. The stay order remains in effect and the next hearing is now scheduled for ~~November 24, 2021.~~January 31, 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.

Yum China License Fee Dispute

Yum China Holdings, Inc. (“Yum China”) is disputing license fees due on certain amounts of its gross revenue under the terms of the Master License Agreement (“MLA”) between the Company and Yum China. These license fees total approximately $7 million for the year to date ended September 30, 2022. License fees related to such revenue have historically been paid by Yum China and we believe they continue to be due under the terms of the MLA. Yum China has paid the $7 million, under protest and without any prejudice to Yum China’s position that they are not obligated to pay under the MLA.

Other Matters

We are currently engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any, cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion that such proceedings and claims are not expected to have a material adverse effect, individually or in the aggregate, on our Condensed Consolidated Financial Statements.

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, ~~2020,~~2021, (“~~2020~~2021 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding.

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of ~~over 52,000~~nearly 54,000 restaurants in ~~more than 150~~over 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut ~~Taco Bell~~ and The Habit Burger Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut ~~and Taco Bell~~ brands are global leaders of the chicken, ~~pizza~~Mexican-style and ~~Mexican-style~~pizza food categories, respectively. The Habit Burger Grill, ~~a concept we acquired on March 18, 2020,~~ is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the ~~over 52,000~~nearly 54,000 restaurants, 98% are operated by franchisees.

YUM currently consists of four operating segments:

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

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

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

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

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

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

Our Recipe for Growth is based on four key drivers:

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

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

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

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

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

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

•Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, (with the exception of Habit Burger Grill restaurants acquired in the first quarter of 2020 for which we included all sales in the quarter ended March 31, 2020 both before and after the acquisition in the prior year base for purposes of determining same-store sales growth for the year to date ended September 30, 2021), 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. Throughout 2020 and continuing into 2021 we have had a significant number of restaurants that were temporarily closed including restaurants closed due to government and landlord restrictions as a result of COVID-19. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below). Throughout 2021 we had a significant number of restaurants that were temporarily closed including restaurants closed due to government and landlord restrictions as a result of COVID-19. We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

•Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects ~~new~~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 isare useful to investors because we depend on ~~net~~ new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth isare 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~~. 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' productsare not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive are included in the Company's revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.

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

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

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

•Effective Tax Rate excluding Special Items;

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

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

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

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

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

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

Results of Operations

Summary

All comparisons within this summary are versus the same period a year ago.

~~For the quarter ended September 30, 2021, GAAP diluted EPS was $1.75 per share, an increase from $0.92 per share in the quarter ended September 30, 2020,~~ The Quarterly and ~~diluted EPS, excluding Special Items, was $1.22 per share, an increase from $1.01 per share in the quarter ended September 30, 2020.~~

~~For the year~~Year to date ~~ended September 30, 2021, GAAP diluted EPS was $4.10 per share, an increase~~Financial Highlights tables below reflect the impact of removing all Russian units from ~~$1.86 per share in~~our unit count and their associated sales from our system sales totals as of the ~~year to date ended September 30, 2020, and diluted EPS, excluding Special Items, was $3.44 per share, an increase from $2.47 per share in~~beginning of the ~~year to date ended September 30, 2020.~~second quarter.

Quarterly Financial ~~highlights:~~Highlights:

% Change

System Sales, ex FX

Same-Store Sales

Units

GAAP Operating Profit

Core Operating Profit

System Sales, ex FX

Same-Store Sales

Units

GAAP Operating Profit

Core Operating Profit

KFC Division

+11

+14

+10

KFC Division

(3)

Taco Bell Division

+10

+11

Pizza Hut Division

+13

+11

Pizza Hut Division

(8)

(3)

Taco Bell Division

(1)

Worldwide

+12

YUM

Year to date Financial ~~highlights:~~Highlights:

~~% Change~~

~~System Sales, ex FX~~

~~Same-Store Sales~~

~~Units~~

~~GAAP Operating Profit~~

~~Core Operating Profit~~

~~KFC Division~~

~~+18~~

~~+14~~

~~+42~~

~~+35~~

~~Pizza Hut Division~~

~~+21~~

~~+18~~

~~Taco Bell Division~~

~~+14~~

~~+12~~

~~+16~~

~~Worldwide(1)~~

~~+15~~

~~+12~~

~~+60~~

~~+26~~

(1) Worldwide system sales growth ex F/X for the year to date ended September 30, 2021, includes the benefit of our acquisition of Habit Burger Grill on March 18, 2020. Same-store sales reflects the inclusion of Habit Burger Grill in the prior year base for periods in the first-quarter of 2020 both before and after the acquisition. Operating profit results of Habit Burger Grill for the period subsequent to our acquisition are reflected in the consolidated figures.

% Change

System Sales, ex FX

Same-Store Sales

Units

GAAP Operating Profit

Core Operating Profit

KFC Division

(5)

Taco Bell Division

Pizza Hut Division

Even

(6)

(3)

YUM

(2)

Even

Additionally:

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

◦YUM and KFC Division year-over-year unit growth as shown above were ~~760~~negatively impacted by two and five percentage points, respectively.

◦YUM system sales growth excluding foreign currency as shown above was negatively impacted by three and one percentage points for the quarter and ~~1,798 for the year to date.~~

•~~During the quarter, we repurchased 2.6 million shares totaling $330 million at an average price of $126.98. During the~~ year to date ~~we repurchased 7.3 million shares totaling $860 million at an average price of $117.07.~~ended September 30, 2022, respectively. YUM Core Operating Profit as shown above was negatively impacted by 3 and 2 percentage points for the quarter and year to date ended September 30, 2022, respectively.

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

•Foreign currency translation ~~positively~~negatively impacted Divisional Operating Profit for the quarter and year to date by ~~$12~~$39 million and ~~$55~~$76 million, respectively.


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

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

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

Worldwide

GAAP Results


		Quarter ended								Year to date									Quarter ended								Year to date
		2021			2020			% B/(W)		2021			2020			% B/(W)			2022			2021			% B/(W)		2022			2021			% B/(W)
Company sales	Company sales	$	513		$	486		5		$	1,509		$	1,244		21		Company sales	$	479		$	513		(7)		$	1,448		$	1,509		(4)
Franchise and property revenues	Franchise and property revenues	716			639			12		2,080			1,760			18		Franchise and property revenues	760			716			6		2,211			2,080			6
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	377			323			17		1,105			905			22		Franchise contributions for advertising and other services	401			377			6		1,164			1,105			5
Total revenues	Total revenues	1,606			1,448			11		4,694			3,909			20		Total revenues	1,640			1,606			2		4,823			4,694			3

Company restaurant expenses	Company restaurant expenses	421			399			(5)		1,230			1,046			(18)		Company restaurant expenses	402			421			5		1,219			1,230			1
G&A expenses	G&A expenses	253			257			1		689			724			5		G&A expenses	261			253			(3)		768			689			(12)
Franchise and property expenses	Franchise and property expenses	31			13			(145)		81			107			25		Franchise and property expenses	28			31			8		89			81			(12)
Franchise advertising and other services expense	Franchise advertising and other services expense	375			313			(19)		1,090			887			(23)		Franchise advertising and other services expense	396			375			(6)		1,153			1,090			(6)
Refranchising (gain) loss	Refranchising (gain) loss	1			(9)			(108)		(21)			(30)			(30)		Refranchising (gain) loss	(3)			1			NM		(15)			(21)			(26)
Other (income) expense	Other (income) expense	(2)			4			NM		(12)			154			NM		Other (income) expense	10			(2)			NM		—			(12)			NM
Total costs and expenses, net	Total costs and expenses, net	1,079			977			(10)		3,057			2,888			(6)		Total costs and expenses, net	1,094			1,079			(1)		3,214			3,057			(5)
Operating Profit	Operating Profit	527			471			12		1,637			1,021			60		Operating Profit	546			527			4		1,609			1,637			(2)

Investment (income) expense, net	Investment (income) expense, net	(51)			(10)			386		(52)			(67)			(22)		Investment (income) expense, net	(27)			(51)			(49)		(19)			(52)			(64)
Other pension (income) expense	Other pension (income) expense	1			4			74		6			9			34		Other pension (income) expense	2			1			NM		3			6			48
Interest expense, net	Interest expense, net	126			161			23		416			411			(1)		Interest expense, net	124			126			1		390			416			6
Income before income taxes	Income before income taxes	451			316			43		1,267			668			90		Income before income taxes	447			451			(1)		1,235			1,267			(3)
Income tax (benefit) provision		(77)			33			330		22			96			77
Income tax provision (benefit)																		Income tax provision (benefit)	116			(77)			NM		281			22			NM
Net Income	Net Income	$	528		$	283		87		$	1,245		$	572		118		Net Income	$	331		$	528		(37)		$	954		$	1,245		(23)

Diluted EPS(a)	Diluted EPS(a)	$	1.75		$	0.92		90		$	4.10		$	1.86		120		Diluted EPS(a)	$	1.14		$	1.75		(35)		$	3.28		$	4.10		(20)
Effective tax rate	Effective tax rate	(17.0)		%	10.5		%	27.5	ppts.	1.8		%	14.4		%	12.6	ppts.	Effective tax rate	25.8		%	(17.0)		%	(42.8)	ppts.	22.7		%	1.8		%	(20.9)	ppts.

(a)See Note 32 for the number of shares used in this calculation.

Performance Metrics


Unit Count	Unit Count	9/30/2021	9/30/2020	% Increase (Decrease)	Unit Count	9/30/2022	9/30/2021	% Increase (Decrease)
Franchise	Franchise	51,070	49,003	4	Franchise	53,014	51,070	4
Company-owned	Company-owned	1,081	1,123	(4)	Company-owned	980	1,081	(9)
Total	Total	52,151	50,126	4	Total	53,994	52,151	4


		Quarter ended		Year to date			Quarter ended		Year to date
		2021	2020	2021	2020		2022	2021	2022	2021
Same-store Sales Growth (Decline) %	Same-store Sales Growth (Decline) %	5	(2)	12	(8)	Same-store Sales Growth (Decline) %	5	5	3	12
System Sales Growth (Decline) %, reported	System Sales Growth (Decline) %, reported	11	1	18	(6)	System Sales Growth (Decline) %, reported	1	11	2	18
System Sales Growth (Decline) %, excluding FX	System Sales Growth (Decline) %, excluding FX	8	1	15	(5)	System Sales Growth (Decline) %, excluding FX	7	8	6	15

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


		Quarter ended				Year to date					Quarter ended				Year to date
		2021		2020		2021		2020			2022		2021		2022		2021

Consolidated	Consolidated									Consolidated
Company sales(a)	Company sales(a)	$	513	$	486	$	1,509	$	1,244	Company sales(a)	$	479	$	513	$	1,448	$	1,509
Franchise sales	Franchise sales	13,828		12,457		40,341		34,108		Franchise sales	14,064		13,828		41,197		40,341
System sales	System sales	14,341		12,943		41,850		35,352		System sales	14,543		14,341		42,645		41,850
Foreign Currency Impact on System sales(b)	Foreign Currency Impact on System sales(b)	298		N/A		1,297		N/A		Foreign Currency Impact on System sales(b)	(859)		N/A		(1,688)		N/A
System sales, excluding FX	System sales, excluding FX	$	14,043	$	12,943	$	40,553	$	35,352	System sales, excluding FX	$	15,402	$	14,341	$	44,333	$	41,850

KFC Division	KFC Division									KFC Division
Company sales(a)	Company sales(a)	$	143	$	130	$	423	$	346	Company sales(a)	$	112	$	143	$	353	$	423
Franchise sales	Franchise sales	7,735		6,779		22,366		18,138		Franchise sales	7,712		7,735		22,456		22,366
System sales	System sales	7,878		6,909		22,789		18,484		System sales	7,824		7,878		22,809		22,789
Foreign Currency Impact on System sales(b)	Foreign Currency Impact on System sales(b)	235		N/A		1,012		N/A		Foreign Currency Impact on System sales(b)	(677)		N/A		(1,332)		N/A
System sales, excluding FX	System sales, excluding FX	$	7,643	$	6,909	$	21,777	$	18,484	System sales, excluding FX	$	8,501	$	7,878	$	24,141	$	22,789

Pizza Hut Division
Taco Bell Division										Taco Bell Division
Company sales(a)	Company sales(a)	$	13	$	20	$	39	$	57	Company sales(a)	$	234	$	225	$	691	$	656
Franchise sales	Franchise sales	3,157		2,974		9,370		8,491		Franchise sales	3,183		2,918		9,343		8,556
System sales	System sales	3,170		2,994		9,409		8,548		System sales	3,417		3,143		10,034		9,212
Foreign Currency Impact on System sales(b)	Foreign Currency Impact on System sales(b)	59		N/A		267		N/A		Foreign Currency Impact on System sales(b)	(17)		N/A		(36)		N/A
System sales, excluding FX	System sales, excluding FX	$	3,111	$	2,994	$	9,142	$	8,548	System sales, excluding FX	$	3,434	$	3,143	$	10,070	$	9,212

Taco Bell Division
Pizza Hut Division										Pizza Hut Division
Company sales(a)	Company sales(a)	$	225	$	218	$	656	$	610	Company sales(a)	$	4	$	13	$	14	$	39
Franchise sales	Franchise sales	2,918		2,696		8,556		7,464		Franchise sales	3,142		3,157		9,331		9,370
System sales	System sales	3,143		2,914		9,212		8,074		System sales	3,146		3,170		9,345		9,409
Foreign Currency Impact on System sales(b)	Foreign Currency Impact on System sales(b)	4		N/A		18		N/A		Foreign Currency Impact on System sales(b)	(165)		N/A		(320)		N/A
System sales, excluding FX	System sales, excluding FX	$	3,139	$	2,914	$	9,194	$	8,074	System sales, excluding FX	$	3,311	$	3,170	$	9,665	$	9,409

Habit Burger Grill Division	Habit Burger Grill Division									Habit Burger Grill Division
Company sales(a)	Company sales(a)	$	132	$	118	$	391	$	231	Company sales(a)	$	129	$	132	$	390	$	391
Franchise sales	Franchise sales	18		8		49		15		Franchise sales	27		18		67		49
System sales	System sales	150		126		440		246		System sales	156		150		457		440
Foreign Currency Impact on System sales(b)	Foreign Currency Impact on System sales(b)	—		N/A		—		N/A		Foreign Currency Impact on System sales(b)	—		N/A		—		N/A
System sales, excluding FX	System sales, excluding FX	$	150	$	126	$	440	$	246	System sales, excluding FX	$	156	$	150	$	457	$	440

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

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

Non-GAAP Items
Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.
Quarter ended Year to date
2021 2020 2021 2020
Core Operating Profit Growth (Decline) % 3 7 26 (8)
Diluted EPS Growth (Decline) %, excluding Special Items 21 27 39 (3)
Effective Tax Rate excluding Special Items 18.9 % 19.3 % 19.7 % 19.0 %

Quarter ended Year to date
2021 2020 2021 2020
Company restaurant profit $ 92 $ 87 $ 279 $ 198
Company restaurant margin % 17.9 % 17.8 % 18.5 % 15.9 %


Non-GAAP Items

Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.

	Quarter ended				Year to date
	2022		2021		2022		2021
Core Operating Profit Growth (Decline) %	8		3		Even		26
Diluted EPS Growth (Decline) %, excluding Special Items	(11)		21		(7)		39
Effective Tax Rate excluding Special Items	26.7	%	18.9	%	23.8	%	19.7	%

Quarter ended Year to date
Detail of Special Items 2021 2020 2021 2020
Refranchising gain (loss)(a)
$ — $ 2 $ 4 $ 8
Costs associated with acquisition and integration of Habit Burger Grill (See Note 2) — — — (9)
Impairment of Habit Burger Grill goodwill (See Note 2) — (5) — (144)
Unlocking Opportunity Initiative contribution(b)
— — — (50)
Charges associated with resource optimization(c)
(4) (32) (7) (32)
Other Special Items Income (Expense) 1 1 2 (6)
Special Items Income (Expense) - Operating Profit (3) (34) (1) (233)
Charges associated with resource optimization - Other pension (expense) income(c)
— (1) 1 (1)
Interest expense, net(d)
— (34) (34) (34)
Special Items Income (Expense) before Income Taxes (3) (69) (34) (268)
Tax (Expense) Benefit on Special Items(e)
11 17 18 57
Tax Benefit - Intra-entity transfer of intellectual property(f)
152 25 216 25
Special Items Income (Expense), net of tax $ 160 $ (27) $ 200 $ (186)
Average diluted shares outstanding 302 307 304 307
Special Items diluted EPS $ 0.53 $ (0.09) $ 0.66 $ (0.61)
Reconciliation of GAAP Operating Profit to Core Operating Profit
Consolidated
GAAP Operating Profit $ 527 $ 471 $ 1,637 $ 1,021
Special Items Income (Expense) (3) (34) (1) (233)
Foreign Currency Impact on Divisional Operating Profit(g)
12 N/A 55 N/A
Core Operating Profit $ 518 $ 505 $ 1,583 $ 1,254
KFC Division
GAAP Operating Profit $ 314 $ 278 $ 932 $ 655
Foreign Currency Impact on Divisional Operating Profit(g)
10 N/A 46 N/A
Core Operating Profit $ 304 $ 278 $ 886 $ 655
Pizza Hut Division
GAAP Operating Profit $ 101 $ 89 $ 306 $ 252
Foreign Currency Impact on Divisional Operating Profit(g)
2 N/A 8 N/A
Core Operating Profit $ 99 $ 89 $ 298 $ 252
Taco Bell Division
GAAP Operating Profit $ 184 $ 186 $ 560 $ 484
Foreign Currency Impact on Divisional Operating Profit(g)
— N/A 1 N/A
Core Operating Profit $ 184 $ 186 $ 559 $ 484
Habit Burger Grill Division
GAAP Operating Profit (Loss) $ 1 $ (7) $ 6 $ (15)
Foreign Currency Impact on Divisional Operating Profit(g)
— N/A — N/A
Core Operating Profit (Loss) $ 1 $ (7) $ 6 $ (15)
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS $ 1.75 $ 0.92 $ 4.10 $ 1.86
Special Items Diluted EPS 0.53 (0.09) 0.66 (0.61)
Diluted EPS excluding Special Items $ 1.22 $ 1.01 $ 3.44 $ 2.47
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate (17.0) % 10.5 % 1.8 % 14.4 %
Impact on Tax Rate as a result of Special Items(e)(f)
(35.9) % (8.8) % (17.9) % (4.6) %
Effective Tax Rate excluding Special Items 18.9 % 19.3 % 19.7 % 19.0 %



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


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

(a)Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with our previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018. As such, refranchising gains and losses recorded during ~~2021~~2022 and ~~2020~~2021 as Special Items are directly associated with restaurants that were refranchised prior to the end of 2018.

During the quarter ended September 30, ~~2020,~~2022, we recorded net refranchising gains of $2$1 million that have been reflected as a Special ~~Item.~~Items. During the years to date ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recorded net refranchising gains of $4$5 million and $8$4 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising ~~losses~~gains of $1$2 million and net refranchising ~~gains~~losses of $7$1 million during the quarters ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, that have not been reflected as Special Items. During the years to date ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recorded net refranchising gains of ~~$17~~$10 million and ~~$22~~$17 million, respectively, that have not been reflected as Special Items. These net refranchising gains and losses relate to refranchising of restaurants in ~~2021~~2022 and ~~2020~~2021 that were not part of our aforementioned plans to achieve 98% franchise ownership and that we believe are now more indicative of our expected ongoing refranchising activity.

(b)~~On June 24, 2020,~~In the ~~YUM! Brands, Inc. Board~~first quarter of Directors approved the establishment of the Company's new global “Unlocking Opportunity Initiative” including a $100 million investment over the next five years to fight inequality by unlocking opportunities for employees, restaurant team members and communities. The Company contributed $50 million in the quarter ended June 30, 2020 to Yum! Brands Foundation, Inc. (a stand-alone, not-for-profit organization that is not consolidated in the Company's results)2022, as ~~part of these efforts and investment. As~~ a result of the ~~size~~Russian invasion of Ukraine, we suspended all investment and ~~specific nature~~restaurant development in Russia. We also suspended all operations of ~~this contribution,~~our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee. Further, we pledged to redirect any future net profits attributable to Russia to humanitarian efforts.

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

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

(c)During the quarter and year to date ended September 30, 2022, we recorded charges of $1 million to General and administrative expenses and $1 million to Other (income) expense related to a resource optimization program initiated in the third quarter of 2020. During the quarter ended September 30, 2021, we recorded a charge of $4 million to General and administrative expenses ~~and during the quarter ended September 30, 2020, we recorded charges of $32 million and $1 million to General and administrative expenses and Other pension (expense) income, respectively,~~ related to ~~a resource optimization program initiated in~~ the ~~third quarter of 2020.~~

program. During the ~~years~~year to date ended September 30, 2021, ~~and 2020,~~ we recorded ~~charges~~a charge of $7 ~~million and $32~~ million to General and administrative ~~expenses, respectively,~~ and a credit of $1 million ~~and a charge of $1 million, respectively,~~ to Other pension ~~(expense) income~~(income) expense related to the ~~resource optimization~~ program.

This program is part of our efforts to optimize our resources, reallocating them toward critical areas of the business that will drive future growth. These critical areas include accelerating our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. Due to the size and scope of the resource optimization program, these ~~amounts~~charges have been reflected as Special Items.

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

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

Due to their collective size and the fact that the amounts are not indicative of our ongoing interest ~~expense. See Note 11.~~expense, we reflected these charges as Special Items.

During the quarter ended September 30, 2020, KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell of America, LLC, each of which a wholly-owned subsidiary of the Company, issued a notice of redemption for $1,050 million aggregate principal amount of 5.00% Subsidiary Senior Unsecured Notes due in 2024 (the "2024 Notes"). The redemption amount included a $26 million call premium plus accrued and unpaid interest to the date of redemption of October 9, 2020. We recorded the call premium, $6 million of unamortized debt issuance costs associated with the 2024 Notes and $2 million of accrued and unpaid interest associated with the period of time from prepayment of the 2024 Notes with the Trustee on September 25, 2020, to their redemption date within Interest expense, net and reflected the charges as Special Items due to their collective size and the fact that the amounts are not indicative of our ongoing interest expense.

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

(f)During the quarter ended September 30, 2020, the United Kingdom (“UK”) Finance Act 2020 was enacted resulting in an increase in the UK corporate income tax rate from 17% to 19%. As a result, in the quarter ended September 30, 2020, we remeasured the deferred tax assets originally recorded as a Special Item in the fourth quarter of 2019 as part of an intercompany restructuring of certain intellectual property (“IP”) rights into the UK and recognized an additional $25 million deferred tax benefit as a Special Item.

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

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

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

~~(g)~~

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

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


Reconciliation of GAAP Operating Profit to Core Operating Profit	Quarter ended						Year to date
	2022			2021			2022			2021
Consolidated
GAAP Operating Profit	$	546		$	527		$	1,609		$	1,637
Special Items Income (Expense)	15			(3)			39			(1)
Foreign Currency Impact on Divisional Operating Profit(a)	(39)			N/A			(76)			N/A
Core Operating Profit	$	570		$	530		$	1,646		$	1,638

KFC Division
GAAP Operating Profit	$	304		$	314		$	888		$	932
Foreign Currency Impact on Divisional Operating Profit(a)	(33)			N/A			(64)			N/A
Core Operating Profit	$	337		$	314		$	952		$	932

Taco Bell Division
GAAP Operating Profit	$	204		$	184		$	604		$	560
Foreign Currency Impact on Divisional Operating Profit(a)	(1)			N/A			(2)			N/A
Core Operating Profit	$	205		$	184		$	606		$	560

Pizza Hut Division
GAAP Operating Profit	$	92		$	101		$	287		$	306
Foreign Currency Impact on Divisional Operating Profit(a)	(5)			N/A			(10)			N/A
Core Operating Profit	$	97		$	101		$	297		$	306

Habit Burger Grill Division
GAAP Operating Profit (Loss)	$	(4)		$	1		$	(14)		$	6
Foreign Currency Impact on Divisional Operating Profit(a)	—			N/A			—			N/A
Core Operating Profit (Loss)	$	(4)		$	1		$	(14)		$	6

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS	$	1.14		$	1.75		$	3.28		$	4.10
Special Items Diluted EPS	0.05			0.53			0.08			0.66
Diluted EPS excluding Special Items	$	1.09		$	1.22		$	3.20		$	3.44

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate	25.8		%	(17.0)		%	22.7		%	1.8		%
Impact on Tax Rate as a result of Special Items	(0.9)		%	(35.9)		%	(1.1)		%	(17.9)		%
Effective Tax Rate excluding Special Items	26.7		%	18.9		%	23.8		%	19.7		%

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

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


Reconciliation of GAAP Operating Profit to Company Restaurant Profit																			Reconciliation of GAAP Operating Profit to Company Restaurant Profit
		Quarter ended 9/30/2020																		Quarter ended 9/30/2022
		KFC Division			Pizza Hut Division			Taco Bell Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated				KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	GAAP Operating Profit (Loss)	$	278		$	89		$	186		$	(7)		$	(75)	$	471		GAAP Operating Profit (Loss)	$	304		$	204		$	92		$	(4)		$	(50)	$	546
Less:	Less:																		Less:
Franchise and property revenues	Franchise and property revenues	340			134			165			—			—		639			Franchise and property revenues	418			196			145			1			—		760
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	116			89			118			—			—		323			Franchise contributions for advertising and other services	174			138			88			1			—		401
Add:	Add:																		Add:
General and administrative expenses	General and administrative expenses	81			51			33			11			81		257			General and administrative expenses	96			41			45			12			67		261
Franchise and property expenses	Franchise and property expenses	7			(2)			8			—			—		13			Franchise and property expenses	15			8			5			—			—		28
Franchise advertising and other services expense	Franchise advertising and other services expense	111			85			117			—			—		313			Franchise advertising and other services expense	166			139			91			—			—		396
Refranchising (gain) loss	Refranchising (gain) loss	—			—			—			—			(9)		(9)			Refranchising (gain) loss	—			—			—			—			(3)		(3)
Other (income) expense	Other (income) expense	—			2			(1)			(1)			4		4			Other (income) expense	26			(1)			(1)			—			(14)		10
Company restaurant profit	Company restaurant profit	$	21		$	2		$	60		$	3		$	1	$	87		Company restaurant profit	$	15		$	57		$	(1)		$	6		$	—	$	77
Company sales	Company sales	$	130		$	20		$	218		$	118		$	—	$	486		Company sales	$	112		$	234		$	4		$	129		$	—	$	479
Company restaurant margin %	Company restaurant margin %	16.3		%	8.2		%	27.8		%	2.2		%	N/A		17.8		%	Company restaurant margin %	13.6		%	23.9		%	(5.4)		%	5.2		%	N/A		16.2		%

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


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


		Year to date 9/30/2020																		Year to date 9/30/2022
		KFC Division			Pizza Hut Division			Taco Bell Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated				KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	GAAP Operating Profit (Loss)	$	655		$	252		$	484		$	(15)		$	(355)	$	1,021		GAAP Operating Profit (Loss)	$	888		$	604		$	287		$	(14)		$	(156)	$	1,609
Less:	Less:																		Less:
Franchise and property revenues	Franchise and property revenues	906			393			460			1			—		1,760			Franchise and property revenues	1,195			574			438			4			—		2,211
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	309			263			333			—			—		905			Franchise contributions for advertising and other services	493			406			264			1			—		1,164
Add:	Add:																		Add:
General and administrative expenses	General and administrative expenses	224			141			108			22			229		724			General and administrative expenses	269			116			145			35			203		768
Franchise and property expenses	Franchise and property expenses	69			11			24			—			3		107			Franchise and property expenses	53			22			9			1			4		89
Franchise advertising and other services expense	Franchise advertising and other services expense	301			256			330			—			—		887			Franchise advertising and other services expense	480			406			266			1			—		1,153
Refranchising (gain) loss	Refranchising (gain) loss	—			—			—			—			(30)		(30)			Refranchising (gain) loss	—			—			—			—			(15)		(15)
Other (income) expense	Other (income) expense	5			(2)			(1)			(1)			153		154			Other (income) expense	44			(2)			(6)			—			(36)		—
Company restaurant profit	Company restaurant profit	$	39		$	2		$	152		$	5		$	—	$	198		Company restaurant profit	$	46		$	166		$	(1)		$	18		$	—	$	229
Company sales	Company sales	$	346		$	57		$	610		$	231		$	—	$	1,244		Company sales	$	353		$	691		$	14		$	390		$	—	$	1,448
Company restaurant margin %	Company restaurant margin %	11.2		%	3.4		%	25.0		%	2.2		%	N/A		15.9		%	Company restaurant margin %	13.1		%	23.9		%	(4.7)		%	4.8		%	N/A		15.8		%


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

Items Impacting Reported Results and ~~Expected~~Reasonably Likely to Impact Future Results

The following items impacted reported results in 2022 and/or 2021 and/or ~~2020 and/or~~ are ~~expected~~reasonably likely to impact future results. See also the Detail of Special Items section of this MD&A for other items similarly impacting results.

Russia Invasion of Ukraine

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

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

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

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

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

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

Impact of Foreign Currency Translation on Operating Profit

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

COVID-19

In late 2019, a novel strain of coronavirus, COVID-19, was first detected and in March 2020, the World Health Organization declared COVID-19 a global pandemic. ~~Throughout 2020 and into 2021,~~As a result of COVID-19, ~~has spread throughout the U.S. and the rest of the world and~~ governmental authorities ~~have~~around the world implemented measures to reduce the spread of ~~COVID-19.~~COVID-19, some of which remain in place today. These measures have included and in some instances continue to include restrictions on travel outside the home and other limitations on business and other activities as well as encouraging social distancing. As a result of COVID-19, we and our franchisees have experienced ~~significant~~ store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures. The impact on our sales in each of our markets has been dependent on the timing, severity and duration of the outbreak, measures implemented by government authorities to reduce the spread of COVID-19, as well as our reliance on dine-in sales in the market.

~~Our results were significantly impacted by the impacts of~~Throughout 2022, COVID-19 outbreaks and resulting government restrictions limiting mobility have continued to impact sales in ~~the year ended December 31, 2020, as evidenced by~~a few key markets, primarily in China. Excluding China, our ~~worldwide~~YUM same-store sales ~~decline of 6%. Overall,~~growth was 7% and our sales declines were primarily driven by temporary store closures, which peaked in early April 2020 at about 11,000 restaurants and ended the year at about 830 restaurants, which meant roughly 98% of our system was open in a full or limited capacity at year end. In addition to the loss of sales due to restaurants being temporarily closed, we also lost sales due to dining room closures or other limitations on access.

Beginning in 2020 and continuing through the third quarter of 2021 we have been able to mitigate the loss of sales due to temporary unit closures, dining room closures or other limitations on access through the strength of our off-premise channels, aided by increasing consumer access to our brands via digital channels. As a result, ourKFC Division same-store sales in the quarter and year to date ended September 30, 2021, increased 5% and 12%, respectively, driven by strong performance in developed markets such as North America and the United Kingdom. Additionally, duringgrowth was 9% for the quarter ended September 30, 2021, we began to see significant recovery across Europe as restrictions eased throughout the quarter as well as pockets of strength in emerging markets including the Middle East, Latin America, Africa2022. Excluding China, our YUM same-store sales growth was 6% and ~~India. We have also seen strong net new unit development of 1,798 units during~~our KFC Division same-store sales growth was 9% for the year to date ended September 30, 2021, which we believe is primarily a result of improving unit-level economics, our franchisees’ financial strength and commitment to our Concepts, the inherent competitive advantages of the Quick Service Restaurant sector throughout the COVID-19 pandemic, our Concepts’ off-premise and digital capabilities, as well as selective use of development incentives with certain franchisees.

Our third quarter 2021 same-store sales results include the impact of approximately 500 restaurants remaining temporarily closed as of September 30, 2021, due to COVID-19. These temporary closures were primarily KFC and Pizza Hut restaurants located in countries where COVID-19 government restrictions remained elevated, including certain parts of Asia and Latin America as well as Australia. Assets located in malls, transportation centers, airports and other similar locations continue to be pressured, making up many of the temporary closures.2022.

The COVID-19 situation is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company's results for the balance of 2021. The ultimate pace of our recovery will largely depend on the pace of restaurant reopenings and the continuation of current sales trends, although we expect continuing adverse impacts from COVID-19 in certain parts of the world. In addition, for our restaurants that prominently feature drive-thru, carryout and delivery options, COVID-19 has in many cases contributed to an increase in sales during 2020 and the year to date 2021. If the impact of COVID-19 recedes, in-person dining restrictions are lifted or lessened and the restaurant industry in general returns to more normal operations, the benefits to sales experienced by certain of our restaurants, including our Pizza Hut delivery restaurants, could wane and our results could be negatively impacted. As 98% of our restaurants are operated by approximately 2,000 independent franchisees across the world, we are closely monitoring the impact of COVID-19 on our franchisees' financial condition.2022.

~~Franchise Bad Debt Expense~~

We experienced significant quarterly fluctuations in franchise bad debt expense in 2020 due in large part to the uncertainties associated with COVID-19. During the quarter ended September 30, 2021, we recognized net bad debt expense of $3 million related to short-term accounts receivable due from our franchisees for royalties, rent and other services we provide, which were primarily reflected within Franchise and property expenses. This net bad debt expense of $3 million compared to $21 million of net bad debt recoveries recognized in the quarter ended September 30, 2020, and thus negatively impacted Operating Profit growth by $24 million quarter-over-quarter.

During the year to date ended September 30, 2021, we recognized net bad debt recoveries of $7 million related to short-term accounts receivable due from our franchisees for royalties, rent and other services we provide, which were primarily reflected within Franchise and property expenses. These net bad debt recoveries of $7 million compared to $21 million of bad debt expense recognized in the year to date ended September 30, 2020, and thus benefited Operating Profit growth by $28 million year-over-year.

Due to the quarterly fluctuations in franchise bad debt expense in 2020 discussed above, we expect quarterly operating profit growth to be negatively impacted in the fourth quarter of 2021 as we lap net bad debt recoveries of $8 million in the quarter ended December 31, 2020.

Investment in Devyani

In 2020, we received ~~an approximate 5%~~a minority interest in Devyani International Limited (“Devyani”), an entity that operates KFC and Pizza Hut franchised units in India. The minority interest was received in lieu of cash proceeds upon the refranchising of approximately 60 KFC restaurants in India. At the time of the refranchisings, the fair value of this minority interest was estimated to be approximately $31 million. ~~During the quarter ended September 30,~~On August 16, 2021, Devyani executed an initial public offering and subsequently the fair value of this investment became readily determinable. As a result, concurrent with the initial public offering we began recording changes in fair value in Investment (income) expense, net in our Condensed Consolidated Statements of Income and recognized pre-tax investment income of ~~$52~~$27 million ~~in the quarter ended September 30, 2021.~~

~~Investment in Grubhub, Inc. (“Grubhub”)~~

~~In April of 2018 we purchased 2.8~~and $20 million, ~~shares of Grubhub common stock for $200 million. In the quarter ended September 30, 2020, we sold our entire investment~~ in Grubhub and received proceeds of $206 million. While we held our investment in Grubhub common stock we recognized changes in the fair value in our investment in our Condensed Consolidated Statements of Income. For the quarter and year to date ended September 30, ~~2020, we recognized~~2022, respectively, and pre-tax investment income of $8$52 million in both the quarter and ~~$69 million, respectively, related~~year to ~~changes in fair value of our investment in Grubhub common stock.~~date ended September 30, 2021.

KFC Division

The KFC Division has ~~26,222~~26,872 units, 85% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, ~~2021.~~2022.


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2022			2021			Reported		Ex FX		2022			2021			Reported		Ex FX
System Sales	$	7,824		$	7,878		(1)		8		$	22,809		$	22,789		Even		6
Same-Store Sales Growth (Decline) %	7			6			N/A		N/A		3			14			N/A		N/A

Company sales	$	112		$	143		(22)		(14)		$	353		$	423		(17)		(11)
Franchise and property revenues	418			391			7		15		1,195			1,124			6		12
Franchise contributions for advertising and other services	174			158			10		16		493			452			9		15
Total revenues	$	704		$	692		2		9		$	2,041		$	1,999		2		8

Company restaurant profit	$	15		$	26		(44)		(38)		$	46		$	77		(40)		(35)
Company restaurant margin %	13.6		%	18.9		%	(5.3)	ppts.	(5.2)	ppts.	13.1		%	18.3		%	(5.2)	ppts.	(5.0)	ppts.

G&A expenses	$	96		$	86		(10)		(13)		$	269		$	239		(12)		(15)
Franchise and property expenses	15			20			27		19		53			49			(8)		(18)
Franchise advertising and other services expense	166			154			(8)		(14)		480			438			(10)		(15)
Operating Profit	$	304		$	314		(3)		7		$	888		$	932		(5)		2

Quarter ended Year to date
% B/(W) % B/(W)
2021 2020 Reported Ex FX 2021 2020 Reported Ex FX
System Sales $ 7,878 $ 6,909 14 11 $ 22,789 $ 18,484 23 18
Same-Store Sales Growth (Decline) % 6 (4) N/A N/A 14 (11) N/A N/A
Company sales $ 143 $ 130 10 5 $ 423 $ 346 22 14
Franchise and property revenues 391 340 15 12 1,124 906 24 19
Franchise contributions for advertising and other services 158 116 36 32 452 309 46 38
Total revenues $ 692 $ 586 18 14 $ 1,999 $ 1,561 28 21
Company restaurant profit $ 26 $ 21 28 20 $ 77 $ 39 100 84
Company restaurant margin % 18.9 % 16.3 % 2.6 ppts. 2.4 ppts. 18.3 % 11.2 % 7.1 ppts. 6.8 ppts.
G&A expenses $ 86 $ 81 (8) (6) $ 239 $ 224 (7) (4)
Franchise and property expenses 20 7 (165) (159) 49 69 29 32
Franchise advertising and other services expense 154 111 (37) (32) 438 301 (45) (36)
Operating Profit $ 314 $ 278 14 10 $ 932 $ 655 42 35


				% Increase (Decrease)										% Increase (Decrease)
Unit Count	Unit Count	9/30/2021	9/30/2020			Unit Count		9/30/2022			9/30/2021
Franchise	Franchise	25,932	24,302		7				Franchise		26,652		25,932		3
Company-owned	Company-owned	290	300	(3)			Company-owned			220		290		(24)
Total	Total	26,222	24,602	7			Total			26,872		26,222		2

Company sales and Company restaurant margin %

The quarterly and year to date ~~increases~~decreases in Company sales, excluding the impacts of foreign currency translation, were driven by ~~company~~the suspension of operations of our 70 company-owned KFC restaurants in Russia. Company same-store sales ~~growth of 9%~~grew 2% and ~~22%~~

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

The quarterly and year to date ~~increases~~decreases in Company restaurant margin %percentage were driven by ~~same-store sales growth.~~commodity and wage inflation.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by franchise same-store sales growth of 6%7% and ~~14% for the quarter and year to date,~~3%, respectively, and unit growth.

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

G&A

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

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

Operating Profit

The quarterly increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, partially offset by ~~current year net bad debt expense lapping prior year net bad debt recoveries for past due franchise receivables~~the negative impact of 5 percentage points on year-over-year operating profit growth as a result of lower profits in Russia, higher G&A and higher ~~G&A.~~restaurant operating costs.

The year to date increase in Operating Profit, excluding the impact of foreign currency translation, was driven by same-store sales growth and unit growth, ~~current year net bad debt recoveries lapping prior year net bad debt expense for past due franchise receivables and lapping the prior year write-off of software no longer being used,~~ partially offset by higher G~~&A.~~&A, the negative impact of 4 percentage points on year-over-year operating profit growth as a result of lower profits in Russia and higher restaurant operating costs.

Taco Bell Division

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


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2022			2021			Reported		Ex FX		2022			2021			Reported		Ex FX

System Sales	$	3,417		$	3,143		9		9		$	10,034		$	9,212		9		9
Same-Store Sales Growth %	6			5			N/A		N/A		6			12			N/A		N/A

Company sales	$	234		$	225		4		4		$	691		$	656		5		5
Franchise and property revenues	196			177			11		11		574			518			11		11
Franchise contributions for advertising and other services	138			132			5		5		406			380			7		7
Total revenues	$	568		$	534		6		7		$	1,671		$	1,554		8		8

Company restaurant profit	$	57		$	53		6		6		$	166		$	161		3		3
Company restaurant margin %	23.9		%	23.4		%	0.5	ppts.	0.5	ppts.	23.9		%	24.5		%	(0.6)	ppts.	(0.6)	ppts.

G&A expenses	$	41		$	40		(2)		(3)		$	116		$	104		(11)		(12)
Franchise and property expenses	8			9			10		10		22			23			2		3
Franchise advertising and other services expense	139			131			(6)		(6)		406			377			(8)		(8)
Operating Profit	$	204		$	184		10		11		$	604		$	560		8		8


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

Company sales and Company restaurant margin %

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

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

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

Franchise and property revenues

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

G&A

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

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

Operating Profit

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

Pizza Hut Division

The Pizza Hut Division has ~~18,007~~18,807 units, ~~64%~~65% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, ~~2021.~~2022.

Quarter ended Year to date
% B/(W) % B/(W)
2021 2020 Reported Ex FX 2021 2020 Reported Ex FX
System Sales $ 3,170 $ 2,994 6 4 $ 9,409 $ 8,548 10 7
Same-Store Sales Growth (Decline) % 4 (3) N/A N/A 9 (8) N/A N/A
Company sales $ 13 $ 20 (34) (36) $ 39 $ 57 (31) (34)
Franchise and property revenues 147 134 9 7 435 393 10 8
Franchise contributions for advertising and other services 87 89 (1) (2) 273 263 4 3
Total revenues $ 247 $ 243 2 — $ 747 $ 713 5 3
Company restaurant profit $ 1 $ 2 (52) (54) $ 3 $ 2 42 32
Company restaurant margin % 6.0 % 8.2 % (2.2) ppts. (2.4) ppts. 6.9 % 3.4 % 3.5 ppts. 3.3 ppts.
G&A expenses $ 45 $ 51 10 11 $ 128 $ 141 9 10
Franchise and property expenses 2 (2) (216) (217) 9 11 20 20
Franchise advertising and other services expense 90 85 (6) (5) 275 256 (8) (7)
Operating Profit $ 101 $ 89 13 11 $ 306 $ 252 21 18

% Increase (Decrease)
Unit Count 9/30/2021 9/30/2020
Franchise 17,954 17,745 1
Company-owned 53 97 (45)
Total 18,007 17,842 1


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2022			2021			Reported		Ex FX		2022			2021			Reported		Ex FX

System Sales	$	3,146		$	3,170		(1)		4		$	9,345		$	9,409		(1)		3
Same-Store Sales Growth (Decline) %	1			4			N/A		N/A		Even			9			N/A		N/A

Company sales	$	4		$	13		(63)		(63)		$	14		$	39		(64)		(64)
Franchise and property revenues	145			147			(2)		3		438			435			1		4
Franchise contributions for advertising and other services	88			87			—		2		264			273			(3)		(2)
Total revenues	$	237		$	247		(4)		(1)		$	716		$	747		(4)		(2)

Company restaurant profit	$	(1)		$	1		NM		NM		$	(1)		$	3		NM		NM
Company restaurant margin %	(5.4)		%	6.0		%	(11.4)	ppts.	(11.4)	ppts.	(4.7)		%	6.9		%	(11.6)	ppts.	(11.6)	ppts.

G&A expenses	$	45		$	45		(2)		(4)		$	145		$	128		(13)		(15)
Franchise and property expenses	5			2			(103)		(133)		9			9			4		(7)
Franchise advertising and other services expense	91			90			(1)		(3)		266			275			3		2
Operating Profit	$	92		$	101		(8)		(3)		$	287		$	306		(6)		(3)


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

Company sales

The quarterly and year to date decreases in Company sales, excluding the impacts of foreign currency translation, were driven by the refranchising of stores in the ~~UK in the quarter ended March 31, 2021, partially offset by company same-store sales growth of 5% and 7% in the quarter and year to date, respectively.~~United Kingdom.

Franchise and property revenues

The quarterly ~~and year to date increases~~increase in Franchise and property revenues, excluding the impacts of foreign currency translation, ~~were~~was driven by unit growth and franchise same-store sales growth of ~~4% and 9%, respectively.~~1%.

~~G&A~~

The ~~quarterly decrease~~year to date increase in ~~G&A,~~Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by ~~lapping higher expenses in~~unit growth and the ~~prior year~~recognition of franchise fees related to ~~our annual incentive compensation program, lower professional fees and~~ ~~lower headcount.~~unexercised development rights arising from a master franchise agreement.

~~The year to date decrease in~~ G&A excluding the impacts of foreign currency translation, was driven by lower headcount, lapping higher expenses in the prior year related to our annual incentive compensation program and lower professional fees.

~~Operating Profit~~

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and lower G&A, partially offset by higher Franchise advertising and other services expense primarily related to digital and technology expenses.

The year to date increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth, lower G&A and current year net bad debt recoveries lapping prior year net bad debt expense for past due franchise receivables, partially offset by higher Franchise advertising and other services expense primarily related to digital and technology expenses.

~~Taco Bell Division~~

~~The Taco Bell Division has 7,619 units, the vast majority of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of September 30, 2021.~~

Quarter ended Year to date
% B/(W) % B/(W)
2021 2020 Reported Ex FX 2021 2020 Reported Ex FX
System Sales $ 3,143 $ 2,914 8 8 $ 9,212 $ 8,074 14 14
Same-Store Sales Growth % 5 3 N/A N/A 12 (2) N/A N/A
Company sales $ 225 $ 218 3 3 $ 656 $ 610 7 7
Franchise and property revenues 177 165 8 7 518 460 13 13
Franchise contributions for advertising and other services 132 118 12 12 380 333 14 14
Total revenues $ 534 $ 501 6 6 $ 1,554 $ 1,403 11 11
Company restaurant profit $ 53 $ 60 (13) (13) $ 161 $ 152 5 5
Company restaurant margin % 23.4 % 27.8 % (4.4) ppts. (4.4) ppts. 24.5 % 25.0 % (0.5) ppts. (0.5) ppts.
G&A expenses $ 40 $ 33 (18) (18) $ 104 $ 108 4 4
Franchise and property expenses 9 8 (17) (16) 23 24 5 5
Franchise advertising and other services expense 131 117 (12) (12) 377 330 (14) (14)
Operating Profit $ 184 $ 186 (1) (1) $ 560 $ 484 16 16

% Increase (Decrease)
Unit Count 9/30/2021 9/30/2020
Franchise 7,143 6,925 3
Company-owned 476 475 —
Total 7,619 7,400 3

~~Company sales and Company restaurant margin %~~

The quarterly and year to date increases in ~~Company sales~~G&A, excluding the impacts of foreign currency translation, were driven by ~~same-store sales growth of 2%~~higher headcount and ~~7% for the quarter and year to date, respectively, and unit growth.~~

~~The quarterly decrease in Company restaurant margin percentage was driven by higher labor costs, higher advertising expenses, commodity inflation~~salaries and higher ~~other restaurant operating costs, partially offset by same-store sales growth.~~

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

~~Franchise and property revenues~~

~~The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 5% and 12%, respectively, and unit growth.~~

~~G&A~~

~~The quarterly increase in G&A was driven by higher expenses~~travel related ~~to our annual incentive compensation programs and higher professional fees.~~

~~The year to date decrease in G&A was driven by lower headcount and lapping higher prior year severance expenses, offset by higher expenses related to our annual incentive compensation programs.~~expenses.

Operating Profit

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

The year to date ~~increase~~decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by ~~same-store sales growth, unit growth and lower~~higher G&A ~~expenses~~ partially offset by ~~higher restaurant costs.~~unit growth.

Habit Burger Grill Division

The Habit Burger Grill Division has ~~303~~341 units, the vast majority of which are in the U.S. The Company owned ~~90%~~84% of the Habit Burger Grill units in the U.S. as of September 30, ~~2021. During~~2022.


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

(a) Beginning with the quarter ended ~~September 30, 2021, The~~March 31, 2022, our Habit Burger Grill ~~opened 8 gross new restaurants~~Division adopted a reporting calendar change as discussed in Note 1. The impact of this change in reporting calendar was not significant, and ~~reported same-store~~accordingly, prior year amounts in these Condensed Consolidated Financial Statements and accompanying Management's Discussion and Analysis have not been restated. System sales growth, excluding the impact of ~~11%. Total revenues~~the reporting calendar change, was 12% and ~~Operating Profit were $133 million and $1 million, respectively,~~13% for the quarter ~~ended September 30, 2021.~~

~~During the~~and year to date ended September 30, 2021, The Habit Burger Grill opened 18 gross new restaurants and reported same-store sales growth of 18%. Total revenues and Operating Profit were $394 million and $6 million, respectively, for the year to date ended September 30, 2021.2022, respectively.


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

Corporate & Unallocated

Quarter ended Year to date
(Expense) / Income 2021 2020 % B/(W) 2021 2020 % B/(W)
Corporate and unallocated G&A $ (70) $ (81) 13 $ (183) $ (229) 20
Unallocated Company restaurant expenses — 1 NM — — NM
Unallocated Franchise and property expenses — — (70) — (3) 118
Unallocated Refranchising gain (loss) (1) 9 (108) 21 30 (30)
Unallocated Other income (expense) (2) (4) NM (5) (153) NM
Investment income (expense), net (See Note 9) 51 10 386 52 67 (22)
Other pension income (expense) (See Note 10) (1) (4) 74 (6) (9) 34
Interest expense, net (126) (161) 23 (416) (411) (1)
Income tax benefit (provision) (See Note 7) 77 (33) 330 (22) (96) 77
Effective tax rate (See Note 7) (17.0) % 10.5 % 27.5 ppts. 1.8 % 14.4 % 12.6 ppts.


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

Corporate and unallocated G&A

The quarterly decrease in Corporate and Unallocated G&A expense was driven by lapping higher prior year costs associated with a voluntary early retirement program offered to our U.S. based employees and a worldwide severance program (see Note 9) and lapping prior year higher charitable contributions, partially offset by higherlower current year expenses related to our annual incentive compensation programs and ~~increased~~lower professional fees, offset by higher software costs and amortization, higher headcount ~~supporting~~and salaries including personnel associated with our 2021 investments in digital and technology ~~initiatives.~~companies and higher travel costs.

The ~~year to date decrease~~year-to-date increase in Corporate and Unallocated G&A expense was driven by ~~lapping~~ higher ~~prior year costs for charitable contributions~~headcount and salaries including ~~$50 million related to our “Unlocking Opportunity Initiative” (see Note 9), lapping prior year costs~~personnel associated with ~~a voluntary early retirement program offered to~~ our ~~U.S. based employees~~2021 investments in digital and ~~a worldwide severance program (see Note 9)~~technology companies, higher software costs and ~~lower professional fees including lapping prior year~~amortization, higher meeting costs, ~~associated with the acquisition of Habit Burger Grill,~~and higher travel costs, offset by ~~higher~~lower current year expenses related to our annual incentive compensation ~~programs, higher share-based compensation expense and increased headcount supporting our technology initiatives.~~

~~Unallocated Other income (expense)~~

Unallocated Other income (expense) for the quarter and year to date ended September 30, 2020, includes charges of $5 million and $144 million, respectively, related to the impairment of Habit Burger Grill goodwill (see Note 2).programs.

Interest expense, net

The quarterly decrease in Interest expense, net was primarily driven by ~~lapping $34 million in expense representing~~ a ~~prior year call premium and unamortized debt issuance costs write-off associated with the prior year redemption of YUM Subsidiary Senior Unsecured Notes due in 2024.~~lower weighted average interest rate offset by higher borrowings.

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

Consolidated Cash Flows

Net cash provided by operating activitieswas $975 million in 2022 versus $1,292 million in ~~2021 versus $853 million in 2020.~~2021. The ~~increase~~decrease was ~~largely~~primarily driven by an increase in incentive compensation payments, timing of spending on advertising and a decrease in Operating profit before Special Items, which includes the ~~lapping~~impact of ~~our $50 million contribution related to our “Unlocking Opportunity Initiative” and a decrease in income tax payments, partially offset by the timing of accounts receivable collections.~~foreign currency translation.

Net cash used in investing activitieswas $112 million in 2022 versus $123 million in ~~2021 versus $269 million in 2020.~~2021. The change was primarily driven by the lapping of our prior year acquisition of ~~The Habit Restaurants, Inc.,~~Dragontail Systems Limited, partially offset by the ~~current~~lapping of our prior year sale of certain mutual fund investments ~~and higher~~refranchising proceeds in the current year, partially offset by the lapping of prior year proceeds from the sale of our investment in Grubhub, Inc. common stock, the current year acquisition of Dragontail Systems Limited and higher current year capital spending.

Net cash used in financing activitieswas $928 million in 2022 versus $881 million in ~~2021 versus net cash provided by financing activities of $24 million in 2020.~~2021. The change was primarily driven by lower current year net borrowings and higher dividends paid, partially offset by lower share repurchases.

Liquidity and Capital Resources

~~Our primary sources of liquidity are cash generated by operations, cash on hand and our Revolving Facility (as defined below).~~ We have historically generated substantial cash flows ~~from the operations of our Company-owned stores and~~ from our extensive franchise operations, which require a limited YUM ~~investment.~~investment, and from the operations of our Company-owned stores. Our annual operating cash flows have ~~historically~~ been in excess of ~~$1 billion.~~$1.3 billion in each of the past three years and we expect that to continue to be the case in 2022. It is our intent to use these operating cash flows to continue to invest in growing our business and pay a ~~meaningful~~competitive dividend, with any remaining excess then returned to shareholders through share repurchases. To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, ~~2021.~~2022. We believe that our ~~existing~~ongoing cash from operations, cash on hand, which was approximately $400 million at September 30, 2022, and availability under our Revolving Facility will be sufficient to fund our ~~operations, anticipated capital expenditures and debt repayment obligations~~cash requirements over the next twelve months.

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

Debt Instruments

As of September 30, ~~2021,~~2022, approximately ~~93%~~94%, including the impact of interest rate swaps, of our ~~$11.3~~$11.6 billion of total debt outstanding, excluding finance leases, is ~~fixed with~~fixed. Our total debt outstanding currently has an effective overall interest rate of approximately ~~4.2%~~4.4%. We are managing a capital structure which reflects consolidated leverage, net of available cash, in-line with our target of ~5.0x EBITDA, and which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BBBB+ (Standard & Poor's)/Ba2 (Moody's) with a balance sheet consistent with highly-levered peer restaurant franchise companies.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, ~~2021.~~2022.


		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2037		2043		Total			2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2037		2043		Total
Securitization Notes	Securitization Notes	$	9	$	39	$	39	$	39	$	39	$	944	$	872	$	582	$	564	$	7	$	681							$	3,815	Securitization Notes	$	10	$	39	$	39	$	39	$	944	$	875	$	582	$	565	$	7	$	682							$	3,782
Credit Agreement	Credit Agreement	5		29		34		48		53		662		15		1,397														2,243		Credit Agreement	9		34		48		53		662		15		1,398														2,219
Subsidiary Senior Unsecured Notes	Subsidiary Senior Unsecured Notes													750																750		Subsidiary Senior Unsecured Notes											750																750
YUM Senior Unsecured Notes	YUM Senior Unsecured Notes					325				600										$	800	$	1,050	$	1,100	$	325	$	275	4,475		YUM Senior Unsecured Notes			325														800		1,050		$	2,100	$	325	$	275	4,875

Total	Total	$	14	$	68	$	398	$	87	$	692	$	1,606	$	1,637	$	1,979	$	564	$	807	$	1,731	$	1,100	$	325	$	275	$	11,283	Total	$	19	$	398	$	87	$	92	$	1,606	$	1,640	$	1,980	$	565	$	807	$	1,732	$	2,100	$	325	$	275	$	11,626

~~Securitization Notes~~ include five series of senior secured notes issued by Taco Bell Funding, LLC (the “Issuer”) totaling $3.8 billion with fixed interest rates ranging from 1.946% to 4.970%. The Securitization Notes are secured by substantially all of the assets of the Issuer and the Issuer’s special purpose, wholly-owned subsidiaries (collectively with the Issuer, the “~~Securitization Entities~~”), and include a lien on all existing and future U.S. Taco Bell franchise and license agreements and the royalties payable thereunder, existing and future U.S. Taco Bell intellectual property, certain transaction accounts and a pledge of the equity interests in asset-owning Securitization Entities. The Securitization Notes contain cross-default provisions whereby the failure to pay principal on any outstanding Securitization Notes will constitute an event of default under any other Securitization Notes.

On August 19, 2021, the Issuer completed a refinancing transaction and issued $900 million of its Series 2021-1 1.946% Fixed Rate Senior Secured Notes, Class A-2-I (the “2021 Class A-2-I Notes”), $600 million of its Series 2021-1 2.294% Fixed Rate Senior Secured Notes, Class A-2-II (the “2021 Class A-2-II Notes”) and $750 million of its Series 2021-1 2.542% Fixed Rate Senior Secured Notes, Class A-2-III (the “2021 Class A-2-III Notes” and, together with the 2021 Class A-2- I Notes and the 2021 Class A-2-II Notes, the “2021 Class A-2 Notes”). The net proceeds from the issuance of the 2021 Class A-2 Notes were used to repay in full the 2016 Class A-2-II Notes of $480 million and 2018 Class A-2-I Notes of $804 million. The remaining net proceeds were distributed to Taco Bell Corp. to pay certain transaction-related expenses, for general corporate purposes and may also be used to return capital to shareholders of the Company. See Note 1110 for details ~~regarding our refinance of~~on the Securitization Notes, ~~during the quarter ended September 30, 2021.~~

~~Credit Agreement~~ includes senior secured credit facilities consisting of a $750 million Term Loan A facility (the “Term Loan A Facility”), a $1.5 billion Term Loan B facility (the “Term Loan B Facility”) and a $1.25 billion revolving facility (the “Revolving Facility”) issued by KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell of America, LLC (collectively, the “Borrowers”), each of which is a wholly-owned subsidiary of the Company. Our Revolving Facility was undrawn as of September 30, 2021. The interest rates applicable to the Term Loan A Facility and the Revolving Facility range from 0.75% to 1.50% plus LIBOR or from 0.00% to 0.50% plus the Base Rate, at the Borrowers’ election, based upon the total net leverage ratio of the Borrowers and the Specified Guarantors (as defined in the Credit Agreement). The interest rates applicable to the Term Loan B Facility are 1.75% plus LIBOR or 0.75% plus the Base Rate, at the Borrowers' election. Our Term Loan A Facility and Term Loan B Facility contain cross-default provisions whereby the failure to pay principal of or otherwise perform any agreement or condition under indebtedness of certain subsidiaries with a principal amount in excess of $100 million will constitute an event of default under the Credit Agreement. See Note 11 for details regarding our refinance of the Credit Agreement, ~~during the quarter ended March 31, 2021.~~

~~Subsidiary Senior Unsecured Notes~~ ~~include $750 million aggregate principal amount of 4.75%~~ Subsidiary Senior Unsecured Notes due 2027. Our Subsidiary Senior Unsecured Notes contain cross-default provisions whereby the acceleration of the maturity of the indebtedness of certain subsidiaries with a principal amount in excess of $100 million or the failure to pay principal of such indebtedness will constitute an event of default under the Subsidiary Senior Unsecured Notes.

On April 23, 2021, the Borrowers issued a notice of redemption for June 1, 2021 for $1,050 million aggregate principal amount of 5.25% Subsidiary Senior Unsecured Notes for 2026 (the “2026 Notes”). The redemption amount was equal to 102.625% of the principal amount redeemed, reflecting a “call premium”. See Note 11.

and YUM Senior Unsecured ~~Notes~~ include seven series of senior unsecured notes issued by Yum! Brands, Inc. totaling $4.5 billion with fixed interest rates ranging from 3.625% to 7.75%. Our YUM Senior Unsecured Notes contain cross-default provisions

whereby the acceleration of the maturity of any of our indebtedness or the failure to pay principal of such indebtedness above certain thresholds will constitute an event of default under the YUM Senior Unsecured Notes unless such indebtedness is discharged, or the acceleration of the maturity of that indebtedness is annulled, within 30 days after notice.

On April 1, 2021, Yum! Brands, Inc. issued $1.1 billion aggregate principal amount of 4.625% YUM Senior Unsecured Notes due January 31, 2032 (the “2032 Notes”). We used the net proceeds from the 2032 Notes and cash on hand to fund the redemption of the 2026 Notes discussed above. See Note 11.

On June 30, 2021, YUM! Brands, Inc. issued a notice of redemption for August 2, 2021 for $350 million aggregate principal amount of 3.75% YUM Senior Unsecured Notes due November 1, 2021 (the “2021 Notes”). The redemption amount was equal to 100% of the $350 million aggregate principal amount redeemed, plus accrued interest to the date of redemption. See Note 11.Notes.

New Accounting Pronouncements Not Yet Adopted

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended September 30, ~~2021,~~2022, to the disclosures made in Item 7A of the Company’s ~~2020~~2021 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 September 30, ~~2021.~~2022.

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, ~~2020,~~2021, 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, ~~2020.~~2021. 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.

4342

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 September 30, ~~2021,~~2022, the related condensed consolidated statements of income, comprehensive income, and shareholders’ deficit for the three-month and nine-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, 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, ~~2020,~~2021, 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 ~~19, 2021,~~22, 2022, 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, ~~2020,~~2021, 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

November ~~3, 2021~~8, 2022

4443

PART II – OTHER INFORMATION AND SIGNATURES

Item 1. Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 1413 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, ~~2020.~~2021, except for those as updated in Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

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

The following table provides information as of September 30, ~~2021,~~2022, with respect to shares of Common Stock repurchased by the Company during the quarter then ended:

Fiscal Periods Total number of shares purchased
(thousands) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs
(thousands) Approximate dollar value of shares that may yet be purchased under the plans or programs
(millions)
7/1/21-7/31/21 618 $118.20 618 $1,927
8/1/21-8/31/21 766 $133.17 766 $1,825
9/1/21-9/30/21 1,218 $127.56 1,218 $1,670
Total 2,602 $126.98 2,602 $1,670


Fiscal Periods	Total number of shares purchased (thousands)	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs (thousands)	Approximate dollar value of shares that may yet be purchased under the plans or programs (millions)
7/1/22-7/31/22	402	$118.28	402	$345

8/1/22-8/31/22	725	$115.29	725	$262

9/1/22-9/30/22	225	$114.51	225	$2,236
Total	1,352	$116.05	1,352

In May 2021, our Board of Directors authorized share repurchases from July 1, 2021 through December 31, 2022, of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock. All shares repurchased above were made pursuant to that authorization. In September 2022, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024. The new authorization will take effect upon the earlier of the exhaustion or expiration of the authorization approved in May 2021.

Item 6. Exhibits

(a)

Exhibit Index

Exhibit No.

Exhibit Description

~~10.1~~

A ~~mended and Restated Base Indenture, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer~~, ~~and Citibank, N.A. as trustee and the Series~~ ~~2021-1~~ ~~securities intermediary~~,~~which is incorporated herein from Exhibit 10.1 to Form 8-K filed on August 25, 2021.~~

~~10.2~~

S ~~eries 2021-1 Supplement to Amended and Restated Base Indenture, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer, and Citibank, N.A. as trustee and Series~~ ~~2021-1~~ ~~securities intermediary,~~ ~~which is incorporated herein from Exhibit 10.~~2 ~~to Form 8-K filed on August 25, 2021.~~

~~10.3~~

A ~~mended and Restated Management Agreement, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer, Taco Bell Franchise Holder 1, LLC, Taco Bell Franch~~is ~~or, LLC,~~ ~~Taco Bell IP Holder, LLC, Taco Bell Franchisor Holdings, LLC and Taco Bell Corp., as manager, and Citibank, N.A. as trustee,~~ ~~which is incorporated herein from Exhibit 10.~~3 ~~to Form 8-K filed on August 25, 2021.~~

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.

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:	November ~~3, 2021~~8, 2022	/s/ David E. Russell
		Senior Vice President, Finance and Corporate Controller
		(Principal Accounting Officer)