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Yum! Brands (NYSE: YUM) Q2 profit jumps on tax gains, Pizza Hut sale

Filing Impact
(High)
Filing Sentiment
(Neutral)
Form Type
8-K

Rhea-AI Filing Summary

Yum! Brands reported solid second‑quarter 2026 results, with total revenue of $2.17 billion, up 12% year over year. GAAP net income was $853 million and GAAP diluted EPS was $3.08, compared with $374 million and $1.33 a year earlier, helped by large tax benefits tied to the planned Pizza Hut sale and related IP reorganizations.

EPS excluding Special Items was $1.62, up 12%, and Core Operating Profit rose 5%. Worldwide system sales grew 5% excluding foreign currency, as unit count increased 5% including 1,053 gross new units. Excluding Pizza Hut, system sales grew 7%, unit count 6%, same‑store sales 4% and Core Operating Profit 8%, with digital system sales approaching $9 billion and exceeding a 60% mix.

KFC delivered 6% system sales growth ex‑F/X and 13% operating profit growth, with an operating margin of 44.3%. Taco Bell posted 9% system sales growth, 7% same‑store sales growth and 19% operating profit growth. Pizza Hut system sales were flat overall with operating profit down 12%. Yum! also entered definitive agreements to sell the Pizza Hut business to LongRange Capital and Yum China in separate transactions and classified related assets and liabilities as held for sale.

Positive

  • None.

Negative

  • None.

Filing Explained

The Pizza Hut sale is agreed but not closed; assets and liabilities are classified as held for sale at June 30, 2026.

YUM reports definitive agreements signed on June 16, 2026 to sell Pizza Hut, with assets and liabilities classified as held for sale at June 30, 2026.

The release says the strategic review is closed, but the Pizza Hut sales themselves are expected to close in the quarter ending September 30, 2026; the agreements therefore have not yet completed the sales.

The filing records a $359 million net deferred tax benefit triggered by the agreements and says it expects to use that benefit when the sales close at book gains.

As a watch item, detailed restricted-group debt disclosure is deferred to the second-quarter Form 10-Q.

Item 2.02 Results of Operations and Financial Condition Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01 Financial Statements and Exhibits Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Item 22.3 Item 22.3
Total revenue Q2 2026 $2,169 million Quarter ended June 30, 2026, up 12% from $1,933 million in Q2 2025
Net income Q2 2026 $853 million Quarter ended June 30, 2026, up 128% versus $374 million a year ago
GAAP diluted EPS Q2 2026 $3.08 Quarter ended June 30, 2026, compared with $1.33 in Q2 2025
EPS excluding Special Items Q2 2026 $1.62 Quarter ended June 30, 2026, up 12% from $1.44 in Q2 2025
Worldwide system sales growth ex F/X Q2 2026 +5% Reported system sales growth excluding foreign currency translation
KFC Division system sales Q2 2026 $9,566 million KFC system sales for quarter ended June 30, 2026; +6% growth ex F/X
Taco Bell same-store sales growth Q2 2026 +7% Taco Bell Division same-store sales growth in the second quarter of 2026
Deferred tax benefit from planned Pizza Hut sale $359 million Net deferred tax benefit recorded upon recognizing tax basis in entities expected to be sold
Core Operating Profit financial
"Core Operating Profit excludes Special Items and foreign currency translation"
Core operating profit is the company's profit from its normal day-to-day business activities after removing one-time items, unusual gains or losses, and financing or tax effects. Investors use it like a household budget that strips out unexpected windfalls or repairs: it shows the steady earnings power of the business and helps compare performance across periods or with peers without distortion from rare or non‑operational events.
Special Items financial
"Special Items are not included in any of our Division segment results"
Special items are unusual or infrequent gains or losses that a company reports separately from its regular operating profit, such as restructuring costs, asset write-downs, legal settlements, or one-time gains from selling a business. Investors pay attention because these items can make reported profits look better or worse than the company’s ongoing performance—like a homeowner’s one-off roof repair affecting a single month’s budget but not the household’s regular income and expenses.
Company restaurant margin % financial
"Company restaurant margin % is defined as Company restaurant profit divided by Company sales"
cyclospora outbreak medical
"food safety and food- or beverage-borne illness concerns, including the impact of the July 2026 cyclospora outbreak"
deferred tax benefit financial
"reflects a $359 million net deferred tax benefit recorded upon the recognition of certain tax basis"
A deferred tax benefit is an accounting entry that represents taxes a company will save in the future because current accounting records and tax rules don’t match or because the company can use past losses to offset future taxable income. Think of it like a coupon for lower tax bills later: it doesn’t put cash in the bank today but reduces expected future taxes, so investors watch it to judge future profitability, cash flow and the realism of reported earnings.
Restricted Group capital structure financial
"outstanding debt in our Restricted Group capital structure will be provided"
Revenue $2,169 million +12% vs Q2 2025
Net income $853 million +128% vs Q2 2025
GAAP diluted EPS $3.08 +131% vs $1.33 in Q2 2025
EPS excluding Special Items $1.62 +12% vs $1.44 in Q2 2025
Worldwide system sales growth ex F/X +5% Compared with prior-year quarter
Core Operating Profit $683 million +5% vs $650 million in Q2 2025

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FAQ

How did Yum! Brands (YUM) perform financially in Q2 2026?
Yum! Brands generated $2,169 million in revenue and $853 million in net income in Q2 2026. GAAP diluted EPS was $3.08 versus $1.33 a year earlier, with results boosted by sizable tax benefits related to the planned Pizza Hut sale and IP reorganization.

What was Yum! Brands (YUM) EPS excluding Special Items in Q2 2026?
EPS excluding Special Items was $1.62 in Q2 2026, up 12% from $1.44 in Q2 2025. This non‑GAAP figure removes Special Items, including Pizza Hut strategic review costs and tax effects, to give a view of underlying earnings performance.

How did YUM’s main divisions perform in Q2 2026?
KFC system sales grew 6% ex‑F/X, Taco Bell 9%, while Pizza Hut declined 2%. KFC operating profit rose 13% to $410 million; Taco Bell operating profit grew 19% to $311 million; Pizza Hut operating profit fell 12% to $70 million.

What did Yum! Brands (YUM) announce about its Pizza Hut business?
Yum! entered two definitive agreements to sell Pizza Hut in June 2026. Pizza Hut (excluding Mainland China) will be sold to LongRange Capital, and Pizza Hut in Mainland China to Yum China, with related assets and liabilities classified as held for sale.

What are Yum! Brands (YUM) long-term growth targets?
Yum! targets 5% unit growth, 7% system sales growth ex‑F/X, and at least 8% Core Operating Profit growth. These metrics, first announced in 2022, represent average performance goals over an extended period and are framed on a non‑GAAP Core Operating Profit basis.

How important is digital to Yum! Brands (YUM) excluding Pizza Hut?
Digital system sales excluding Pizza Hut approached $9 billion in Q2 2026 with mix above 60%. The company defines digital sales as transactions where ordering is primarily facilitated by automated technology across its system restaurants.
0001041061false00010410612026-07-302026-07-30

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

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

July 30, 2026
________________________
YUM! BRANDS, INC.
(Exact name of registrant as specified in its charter)

Commission File Number 1-13163

North Carolina13-3951308
(State or other jurisdiction of(I.R.S. Employer
incorporation)Identification No.)
1441 Gardiner Lane,Louisville,Kentucky40213
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:(502)874-8300
Former name or former address, if changed since last report:N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act
 Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
 Common Stock, no par valueYUMNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐


    
Item 2.02 Results of Operations and Financial Condition

On July 30, 2026, YUM! Brands, Inc. (“YUM”) issued a press release announcing financial results for the quarter ended June 30, 2026.  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

Item 9.01Financial Statements and Exhibits

(d) Exhibits
Exhibit NumberDescription
99.1
Earnings Press Release dated July 30, 2026 from YUM! Brands, Inc.
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



SIGNATURES

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


   YUM! BRANDS, INC. 
   (Registrant) 



Date:July 30, 2026 /s/ David E. Russell 
David E. Russell
   Sr. Vice President, Finance and Corporate Controller 
   (Principal Accounting Officer) 


yumbrandslockuprgbsourcejua.jpg
NEWS
Yum! Brands Reports Second-Quarter Results
Taco Bell Same-Store Sales Growth 7%; KFC Unit Growth 7%;
Digital System Sales Mix Excluding Pizza Hut Exceeded 60%

Louisville, KY (July 30, 2026) - Yum! Brands, Inc. (NYSE: YUM) today reported results for the second quarter ended June 30, 2026. Second-quarter GAAP EPS was $3.08 and second-quarter EPS excluding Special Items was $1.62.

CHRIS TURNER COMMENTS
Chris Turner, CEO, said “We delivered another strong quarter with robust same-store sales and restaurant-level margin performance. We also reached separate definitive agreements with two exceptional buyers for the Pizza Hut business, bringing our strategic review process to a close. Yum! will enter its next chapter as a more focused organization positioned to accelerate growth. As we continue to Raise the B.A.R., our priorities are to deepen consumer relevance, improve restaurant economics, bring the benefits of Byte by Yum! to more of our system and allocate capital in a way that creates sustained shareholder value. Our message is straightforward: Yum! is built for dependable growth, disciplined execution and long-term value creation.”

STRATEGIC ANNOUNCEMENTS
•On June 15th, KFC launched its next chapter on the journey to set the standard for the modern chicken QSR. This involves a refreshed brand identity and a menu revamp that is centered around boneless chicken, beverages and crave-worthy sauces. KFC is bringing consumers a more flavor-forward experience built to unlock flavor exploration, personalization and craveability while giving fans more ways to customize to make the menu their own. KFC's aspiration is to have core elements of its strategy live across its Top 20 markets by the end of 2027.
•On June 16th, Yum! entered into two definitive agreements to sell Pizza Hut. Pizza Hut, excluding Mainland China, will be acquired by LongRange Capital, a private equity firm with a consumer-centric and operationally oriented approach, and Pizza Hut in Mainland China will be acquired by Yum China, which will remain Yum!'s master franchisee for KFC and Taco Bell in Mainland China. The sale provides the strongest path to maximize shareholder value while providing Pizza Hut an ownership structure tailored to its distinct markets, competitive strengths and long-term priorities.

SECOND-QUARTER HIGHLIGHTS
•Worldwide system sales grew 5%, excluding foreign currency translation.
•Unit count increased 5% including 1,053 gross new units in the quarter.
•GAAP Operating Profit grew 5% and Core Operating Profit grew 5%.
•Foreign currency translation favorably impacted divisional operating profit by $16 million.
•Excluding Pizza Hut, digital system sales approached $9 billion, with digital mix exceeding 60%.
•Excluding Pizza Hut, system sales grew 7% excluding foreign currency translation, unit count grew 6%, same-store sales grew 4% and Core Operating Profit grew 8%.

Reported Results% Change
System Sales
Ex F/X		Same-Store SalesUnitsGAAP Operating Profit
Core
Operating Profit1
KFC Division+6+2+7+13+9
Taco Bell Division+9+7+3+19+19
Pizza Hut Division(2)(1)+1(12)(14)
Worldwide+5+3+5+5+5
Second-QuarterYear-to-Date
20262025% Change20262025% Change
GAAP EPS$3.08$1.33+131$4.62$2.23+107
Less Special Items EPS1
$1.46$(0.11)NM$1.50$(0.51)NM
EPS Excluding Special Items$1.62$1.44+12$3.12$2.74+14

1 See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Core Operating Profit and Special Items.
All comparisons are versus the same period a year ago.
System sales growth figures exclude foreign currency translation ("F/X") and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.
Digital system sales includes all transactions at system restaurants where consumers utilize ordering interaction that is primarily facilitated by automated technology.
Yum! Brands, Inc. • 1900 Colonel Sanders Lane • Louisville, KY 40213 • P: 502 874-8300 • investors.yum.com



KFC DIVISION

Second-QuarterYear-to-Date
%/ppts Change%/ppts Change
20262025ReportedEx F/X20262025ReportedEx F/X
Restaurants34,74732,369+7N/A34,74732,369+7N/A
System Sales ($MM)9,5668,721+10+618,89417,061+11+6
Same-Store Sales Growth (%)+2+2NMNM+2+2NMNM
Franchise and Property Revenues ($MM)477437+9+6938844+11+7
Operating Profit ($MM)410363+13+9793694+14+9
Operating Margin (%)44.342.7+1.6+1.644.042.8+1.2+1.2

•KFC Division opened 660 gross new restaurants across 55 countries.
•Company-owned restaurant margins were 12.0%, down 10 basis points year-over-year.
•Foreign currency translation favorably impacted operating profit by $14 million.

KFC Markets1
Percent of KFC System Sales2
System Sales Growth Ex F/X
Second-Quarter
(% Change)		Year-to-Date
(% Change)
China26%+6+6
Europe13%Even+1
United States12%(2)(2)
Asia12%+10+10
Latin America8%+10+11
Australia7%+5+4
United Kingdom7%+10+9
Middle East / Turkey / North Africa6%+20+19
Africa5%+6+7
Canada2%(1)(1)
India2%+16+16
1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.
2Reflects Full Year 2025.

Yum! Brands, Inc. • 1900 Colonel Sanders Lane • Louisville, KY 40213 • P: 502 874-8300 • investors.yum.com


TACO BELL DIVISION
Second-QuarterYear-to-Date
%/ppts Change%/ppts Change
20262025ReportedEx F/X20262025ReportedEx F/X
Restaurants9,0468,756+3N/A9,0468,756+3N/A
System Sales ($MM)4,6774,275+9+99,0718,255+10+10
Same-Store Sales Growth (%)+7+4NMNM+8+6NMNM
Franchise and Property Revenues ($MM)271248+9+9522482+8+8
Operating Profit ($MM)311262+19+19591502+18+18
Operating Margin (%)36.436.8(0.4)(0.4)35.836.7(0.9)(0.9)


•Taco Bell Division opened 54 gross new restaurants across 15 countries.
•Taco Bell U.S. system sales grew 9% and same-store sales grew 7%. U.S. company-owned restaurant margins were 26.2%.
•Taco Bell International system sales excluding foreign currency translation grew 13% and same-store sales grew 5%.

PIZZA HUT DIVISION
Second-QuarterYear-to-Date
%/ppts Change%/ppts Change
20262025ReportedEx F/X20262025ReportedEx F/X
Restaurants19,98519,768+1N/A19,98519,768+1N/A
System Sales ($MM)3,1083,116Even(2)6,2236,144+1(1)
Same-Store Sales Growth (%)(1)(1)NMNM(1)(1)NMNM
Franchise and Property Revenues ($MM)143147(3)(4)285290(2)(3)
Operating Profit ($MM)7080(12)(14)135155(13)(15)
Operating Margin (%)27.633.5(5.9)(6.3)26.532.9(6.4)(6.7)


•Pizza Hut Division opened 333 gross new restaurants across 33 countries.
•Foreign currency translation favorably impacted operating profit by $2 million.

Second-Quarter (% Change)Year-to-Date (% Change)
InternationalU.S.InternationalU.S.
System Sales Growth Ex F/XEven(5)+2(6)
Same-Store Sales Growth(1)(2)+1(3)

Pizza Hut Markets1
Percent of Pizza Hut System Sales2
System Sales Growth Ex F/X
Second-Quarter
(% Change)		Year-to-Date
(% Change)
United States40%(5)(6)
China19%+4+6
Asia13%(1)+3
Europe12%(11)(9)
Latin America7%+4+6
Middle East / Africa4%+6+8
Canada3%+3Even
India2%+5+3
1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.
2Reflects Full Year 2025.
3


HABIT BURGER & GRILL DIVISION

•Habit Burger & Grill Division opened 6 gross new restaurants.
•Habit Burger & Grill Division system sales grew 7% and same-store sales grew 3%.

OTHER ITEMS
•See reconciliation of Non-GAAP Measurements to GAAP results within this release for further detail of Special Items by financial statement line item including the impact of Special Items on General and administrative expenses.
•Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the second-quarter Form 10-Q.

LONG-TERM GROWTH ALGORITHM
•The Company targets the following long-term financial performance metrics, first announced in 2022, that it believes it can achieve over an extended period of time, on average:
•5% Unit Growth
•7% System Sales Growth, excluding F/X; and
•At least 8% Core Operating Profit Growth1




















































1At this time, we are unable to forecast any Special Items or any impact from changes in F/X rates, and therefore cannot provide an estimate of Operating Profit Growth on a GAAP basis.
4

CONFERENCE CALL
Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 8:15 a.m. Eastern Time July 30, 2026. The number is 800/715-9871 for North America callers and +1/646-307-1963 for international callers, conference ID 8719077.

The call will be available for playback beginning at 10:00 a.m. Eastern Time July 30, 2026 through August 6, 2026. To access the playback, dial +1/800-770-2030 in North America and +1/609-800-9909 for all international callers, conference ID 8719077.

The webcast and the playback can be accessed by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q2 2026 Yum! Brands, Inc. Earnings Call.”
ADDITIONAL INFORMATION ONLINE
Quarter-end dates for each division, restaurant count details, definitions of terms and Restricted Group financial information are available at investors.yum.com. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included in our Condensed Consolidated Summary of Results.
FORWARD-LOOKING STATEMENTS
This announcement may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally 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. These statements are based on and reflect 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, including with respect to the future earnings and performance or capital structure of Yum! Brands, will prove to be correct or that any of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: food safety and food- or beverage-borne illness concerns, including the impact of the July 2026 cyclospora outbreak; the impact of such outbreak on sales and pace of recovery; adverse impacts of public health conditions or other catastrophic or unforeseen events; the success and financial stability of our concepts’ franchisees; the success of our development strategy; anticipated benefits from past or potential future acquisitions, investments, other strategic transactions or initiatives, or our portfolio business model; the possibility that the sale of the Pizza Hut business will not close within the anticipated timeframe, or at all, or that we may not be able to realize the anticipated benefits of the sale of the Pizza Hut business; our significant exposure to the Chinese market; our global operations and related exposure to geopolitical instability, including the expansion or threatened expansion of restrictive trade policies and increasing anti-American sentiment; foreign currency risks and foreign exchange controls; our ability to protect the integrity or availability of IT systems or the security of confidential information and other cybersecurity risks; compliance with data privacy, data protection and emerging technology legal requirements; our ability to successfully and securely implement technology initiatives, including utilization of artificial intelligence; our increasing dependence on digital commerce and delivery platforms; the impact of social media; our ability to protect our trademarks or other intellectual property; shortages or interruptions in the availability and the delivery of food, equipment and other supplies; the loss of key personnel or failure to successfully transition senior management, labor shortages and increased labor costs, including as a result of state and local legislation related to wages and working conditions; changes in food prices and other operating costs; our corporate reputation, the value and perception of our brands and changes in consumer preferences such as wellness trends; evolving expectations and requirements with respect to social and environmental sustainability matters; adverse effects of severe weather and climate change; pending or future litigation and legal claims or proceedings; changes in, or non-compliance with, legal requirements; tax matters, including changes in tax rates or laws, impositions of new taxes, tax implications of our restructurings, or disagreements with taxing authorities; changes in consumer discretionary spending and macroeconomic conditions, including inflationary pressures and interest rate conditions; competition within the retail food industry; and risks relating to our level of indebtedness. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The forward-looking statements included in this announcement are only made as of the date of this announcement and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances.

You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q) for additional detail about factors that could affect our financial and other results.

Yum! Brands, Inc., and its subsidiaries franchise or operate more than 64,000 restaurants in 157 countries and territories under its iconic brands — KFC, Taco Bell, Pizza Hut and Habit Burger & Grill. KFC, Taco Bell and Pizza Hut are global leaders in the chicken, Mexican-inspired food and pizza categories, respectively. Habit is a fast-casual concept known for fresh, cooked-to-order food. Fueled by Yum!’s Recipe for Good Growth, KFC, Taco Bell and Pizza Hut led Entrepreneur's 2026 Franchise 500 rankings and its Top Global Franchises 2025 list. In 2026, Yum!’s unrivaled culture and talent led it to be named one of TIME magazine’s list of Best Companies for Future Leaders for the third consecutive year.
    
Analysts are invited to contact:
Matt Morris, Head of Investor Relations at 888/298-6986
Members of the media are invited to contact:
Lori Eberenz, Director, Public Relations, at 502/874-8200
5

YUM! Brands, Inc.
Condensed Consolidated Summary of Results
(amounts in millions, except per share amounts)
(unaudited)
 Quarter ended% ChangeYear to date% Change
 6/30/266/30/25B/(W)6/30/266/30/25B/(W)
Revenues
Company sales$837 $669 25$1,622 $1,277 27
Franchise and property revenues895 835 71,751 1,620 8
Franchise contributions for advertising and other services438 428 2856 823 4
Total revenues2,169 1,933 124,228 3,720 14
Costs and Expenses, Net
Company restaurant expenses700 560 (25)1,378 1,081 (27)
General and administrative expenses324 302 (7)646 604 (7)
Franchise and property expenses41 39 (6)85 73 (16)
Franchise advertising and other services expense444 428 (4)863 824 (5)
Refranchising (gain) loss(1)(11)(88)(2)(16)(85)
Other (income) expense6 (7)NM(39)(15)NM
Total costs and expenses, net1,514 1,311 (16)2,930 2,550 (15)
Operating Profit655 622 51,299 1,170 11
Investment (income) expense, net(6)— NM(6)(1)NM
Other pension (income) expense— (1)(93)— (1)(74)
Interest expense, net128 123 (4)257 243 (6)
Income before income taxes533 499 71,049 929 13
Income tax (benefit) provision(320)125 356(236)301 178
Net Income$853 $374 128$1,285 $628 105
Basic EPS
EPS$3.10 $1.34 131$4.65 $2.25 107
Average shares outstanding275 279 1276 279 1
Diluted EPS
EPS$3.08 $1.33 131$4.62 $2.23 107
Average shares outstanding277 281 1278 282 1
Dividends declared per common share$0.75 $0.71 $1.50 $1.42 

See accompanying notes.

6

YUM! Brands, Inc.
KFC DIVISION Operating Results
(amounts in millions)
(unaudited)

 Quarter ended% ChangeYear to date% Change
 6/30/266/30/25B/(W)6/30/266/30/25B/(W)
Company sales$275 $245 12$530 $461 15
Franchise and property revenues477 437 9938 844 11
Franchise contributions for advertising and other services172 167 3334 316 6
Total revenues924 849 91,802 1,622 11
Company restaurant expenses242 216 (12)471 411 (14)
General and administrative expenses88 89 1174 169 (3)
Franchise and property expenses18 20 1237 36 (1)
Franchise advertising and other services expense169 162 (4)329 311 (6)
Other (income) expense(2)— NM(2)— NM
Total costs and expenses, net514 487 (6)1,010 928 (9)
Operating Profit$410 $363 13$793 $694 14
Company restaurant margin %1
12.0 %12.1 %(0.1) ppts.11.2 %10.8 %0.4 ppts.
Operating margin44.3 %42.7 %1.6 ppts.44.0 %42.8 %1.2 ppts.
 
See accompanying notes.

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.

7

YUM! Brands, Inc.
TACO BELL DIVISION Operating Results
(amounts in millions)
(unaudited)
 
 Quarter ended% ChangeYear to date% Change
 6/30/266/30/25B/(W)6/30/266/30/25B/(W)
Company sales$396 $287 38$768 $550 40
Franchise and property revenues271 248 9522 482 8
Franchise contributions for advertising and other services185 176 5360 336 7
Total revenues853 711 201,650 1,368 21
Company restaurant expenses294 217 (35)578 421 (37)
General and administrative expenses53 49 (8)106 98 (8)
Franchise and property expenses9 7 (24)15 13 (13)
Franchise advertising and other services expense187 176 (7)361 333 (8)
Other (income) expense(1)— NM— — NM
Total costs and expenses, net542 449 (21)1,059 865 (22)
Operating Profit$311 $262 19$591 $502 18
Company restaurant margin %1
25.9 %24.3 %1.6 ppts.24.8 %23.4 %1.4 ppts.
Operating margin36.4 %36.8 %(0.4) ppts.35.8 %36.7 %(0.9) ppts.
 
See accompanying notes.

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.



8

YUM! Brands, Inc.
PIZZA HUT DIVISION Operating Results
(amounts in millions)
(unaudited)

 
 Quarter ended% ChangeYear to date% Change
 6/30/266/30/25B/(W)6/30/266/30/25B/(W)
Company sales$31 $7 348$63 $10 505
Franchise and property revenues143 147 (3)285 290 (2)
Franchise contributions for advertising and other services80 85 (6)159 169 (6)
Total revenues254 239 6507 470 8
Company restaurant expenses30 7 (311)62 11 (457)
General and administrative expenses56 54 (5)116 109 (6)
Franchise and property expenses13 10 (29)31 21 (44)
Franchise advertising and other services expense87 90 3171 179 5
Other (income) expense(3)(3)NM(6)(5)NM
Total costs and expenses, net184 159 (16)373 315 (18)
Operating Profit$70 $80 (12)$135 $155 (13)
Company restaurant margin %1
2.2 %(6.6)%8.8 ppts.2.0 %(6.4)%8.4 ppts.
Operating margin27.6 %33.5 %(5.9) ppts.26.5 %32.9 %(6.4) ppts.
 
See accompanying notes.

1See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Company restaurant margin %.


9

YUM! Brands, Inc.
Condensed Consolidated Balance Sheets
(amounts in millions)
(unaudited)

 

6/30/26
12/31/25
ASSETS  
Current Assets 
Cash and cash equivalents$674 $709 
Accounts and notes receivable, less allowance: $45 in 2026 and $60 in 2025623 841 
Prepaid expenses and other current assets498 489 
Assets held for sale746 1 
Total Current Assets2,541 2,040 
Property, plant and equipment, net of accumulated depreciation of $1,495 in 2026
and $1,485 in 20251,614 1,605 
Goodwill716 969 
Intangible assets, net807 909 
Other assets1,629 1,708 
Deferred income taxes1,373 965 
Total Assets$8,682 $8,197 
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable and other current liabilities$1,191 $1,433 
Income taxes payable26 46 
Short-term borrowings2,813 38 
Liabilities held for sale262 — 
Total Current Liabilities4,292 1,516 
Long-term debt9,462 11,872 
Other liabilities and deferred credits2,035 2,133 
Total Liabilities15,789 15,521 
Shareholders' Deficit
Common Stock, no par value, 750 shares authorized; 273 shares issued in 2026 and 277 shares issued in 2025
— — 
Accumulated deficit(6,809)(7,014)
Accumulated other comprehensive loss(298)(311)
Total Shareholders' Deficit(7,107)(7,325)
Total Liabilities and Shareholders' Deficit$8,682 $8,197 
 See accompanying notes.


10

YUM! Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)
 Year to date
 6/30/266/30/25
Cash Flows - Operating Activities 
Net Income$1,285 $628 
Depreciation and amortization119 89 
Refranchising (gain) loss(2)(16)
Deferred income taxes(411)12 
Share-based compensation expense35 37 
Changes in accounts and notes receivable16 34 
Changes in prepaid expenses and other current assets(43)(47)
Changes in accounts payable and other current liabilities(71)(42)
Changes in income taxes payable(17)21 
Other, net12 134 
Net Cash Provided by Operating Activities 923 850 
Cash Flows - Investing Activities
Capital spending(175)(142)
Acquisition of franchise restaurants(5)(98)
Proceeds from refranchising of restaurants1 32 
Maturities (purchases) of Short term investments, net— 91 
Other, net10 (13)
Net Cash Used in Investing Activities(169)(130)
Cash Flows - Financing Activities
Repayments of long-term debt(14)(12)
Revolving credit facilities, three months or less, net375 50 
Repurchase shares of Common Stock(674)(338)
Dividends paid on Common Stock(413)(395)
Other, net(31)(46)
Net Cash Used in Financing Activities (757)(741)
Effect of Exchange Rate on Cash and Cash Equivalents(4)31 
Less: Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Classified within Assets held for sale(32)— 
Net (Decrease) Increase in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents(39)11 
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period923 807 
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period$884 $818 
See accompanying notes.

11

Reconciliation of Non-GAAP Measurements to GAAP Results
(amounts in millions, except per share amounts)
(unaudited)
 
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 ("EPS") excluding Special Items (as defined below);
•Effective Tax Rate excluding Special Items;
•Core Operating Profit. Core Operating Profit excludes Special Items and foreign currency translation (“F/X”) and we use Core Operating Profit for the purposes of evaluating performance internally;
•Net Income, excluding Special Items;
•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. The Special Items are described in (a) - (e) in the accompanying notes.

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. Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and Unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance the comparability of acquired stores' margins with those of existing restaurants. 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 non-GAAP measurements are presented excluding the impact of F/X. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

 Quarter endedYear to date
 6/30/266/30/256/30/266/30/25
Reconciliation of GAAP Operating Profit to Core Operating Profit
Consolidated
GAAP Operating Profit$655$622$1,299 $1,170 
Detail of Special Items:
Charges associated with Pizza Hut Strategic Options Review (a)
44—81 — 
Charges associated with Brand HQ Consolidation (b)
—101 17 
Charges associated with Resource Optimization—14— 32 
Income from Litigation Settlement(c)
——(44)— 
German acquisition and Turkey termination-related costs(d)
—5— 7 
Special Items Expense - Operating Profit442838 55 
Positive Foreign Currency Impact on Division Operating Profit(16)N/A(41)N/A
Core Operating Profit$683$650$1,296 $1,225 
12

Special Items as shown above were recorded to the financial statement line items identified below.
Quarter endedYear to date
6/30/266/30/256/30/266/30/25
Condensed Consolidated Summary of Results Line Item
Decrease in Franchise and property revenues$—$—$— $1 
Increase in General and administrative expenses442882 56 
Increase in Other income——(44)(2)
Special Items Expense - Operating Profit$44$28$38 $55 
KFC Division
GAAP Operating Profit$410 $363 $793 $694 
Negative (Positive) Foreign Currency Impact (14)N/A(37)N/A
Core Operating Profit$395 $363 $756 $694 
Taco Bell Division
GAAP Operating Profit$311 $262 $591 $502 
Negative (Positive) Foreign Currency Impact— N/A(1)N/A
Core Operating Profit$310 $262 $590 $502 
Pizza Hut Division
GAAP Operating Profit$70 $80 $135 $155 
Negative (Positive) Foreign Currency Impact(2)N/A(4)N/A
Core Operating Profit$69 $80 $131 $155 
Habit Burger & Grill Division
GAAP Operating Profit (Loss)$(4)$3 $(11)$2 
Negative (Positive) Foreign Currency Impact— N/A— N/A
Core Operating Profit (Loss)$(4)$3 $(11)$2 
Reconciliation of GAAP Net Income to Net Income excluding Special Items
GAAP Net Income$853 $374 $1,285 $628 
Special Items Expense - Operating Profit44 28 38 55 
Special Items Tax (Benefit) Expense(e)
(449)3 (456)88 
Net Income excluding Special Items$449 $405 $867 $771 
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS $3.08 $1.33 $4.62 $2.23 
Less Special Items Diluted EPS1.46 (0.11)1.50 (0.51)
Diluted EPS excluding Special Items$1.62 $1.44 $3.12 $2.74 
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate(60.1)%25.1 %(22.5)%32.4 %
Impact on Tax Rate as a result of Special Items(82.4)%1.9 %(42.8)%10.8 %
Effective Tax Rate excluding Special Items22.3 %23.2 %20.3 %21.6 %
13



Reconciliation of GAAP Operating Profit to Company Restaurant Profit
Quarter ended 6/30/2026
KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
GAAP Operating Profit (Loss)$410 $311 $70 $(4)$(132)$655 
Less:
Franchise and property revenues477 271 143 3 — 895 
Franchise contributions for advertising and other services172 185 80 1 — 438 
Add:
General and administrative expenses88 53 56 12 114 324 
Franchise and property expenses18 9 13 1 — 41 
Franchise advertising and other services expense169 187 87 1 — 444 
Refranchising (gain) loss— — — — (1)(1)
Other (income) expense(2)(1)(3)6 6 6 
Company restaurant profit (loss)$33 $103 $1 $13 $(13)$137 
Company sales$275 $396 $31 $135 $— $837 
Company restaurant margin %12.0 %25.9 %2.2 %9.8 %N/A16.3 %

Quarter ended 6/30/2025
KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
GAAP Operating Profit (Loss) $363 $262 $80 $3 $(85)$622 
Less:
Franchise and property revenues437 248 147 3 — 835 
Franchise contributions for advertising and other services167 176 85 1 — 428 
Add:
General and administrative expenses89 49 54 13 97 302 
Franchise and property expenses20 7 10 1 — 39 
Franchise advertising and other services expense162 176 90 1 — 428 
Refranchising (gain) loss— — — — (11)(11)
Other (income) expense— — (3)— (4)(7)
Company restaurant profit (loss)$30 $70 $— $14 $(4)$109 
Company sales$245 $287 $7 $130 $— $669 
Company restaurant margin % 12.1 %24.3 %(6.6)%10.7 %N/A16.3 %

14

Year to Date 6/30/2026
KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
GAAP Operating Profit (Loss)$793 $591 $135 $(11)$(209)$1,299 
Less:
Franchise and property revenues938 522 285 6 — 1,751 
Franchise contributions for advertising and other services334 360 159 2 — 856 
Add:
General and administrative expenses174 106 116 25 225 646 
Franchise and property expenses37 15 31 2 — 85 
Franchise advertising and other services expense329 361 171 2 — 863 
Refranchising (gain) loss— — — — (2)(2)
Other (income) expense(2)— (6)8 (39)(39)
Company restaurant profit (loss)$59 $191 $1 $18 $(25)$244 
Company sales$530 $768 $63 $260 $— $1,622 
Company restaurant margin % 11.2 %24.8 %2.0 %6.9 %N/A15.0 %

Year to Date 6/30/2025
KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
GAAP Operating Profit (Loss)$694 $502 $155 $2 $(183)$1,170 
Less:
Franchise and property revenues844 482 290 5 (1)1,620 
Franchise contributions for advertising and other services316 336 169 1 — 823 
Add:
General and administrative expenses169 98 109 26 202 604 
Franchise and property expenses36 13 21 2 — 73 
Franchise advertising and other services expense311 333 179 1 — 824 
Refranchising (gain) loss— — — — (16)(16)
Other (income) expense— — (5)— (10)(15)
Company restaurant profit (loss)$50 $129 $(1)$25 $(7)$196 
Company sales$461 $550 $10 $255 $— $1,277 
Company restaurant margin % 10.8 %23.4 %(6.4)%9.6 %N/A15.3 %
15

YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)

    
Quarter ended 6/30/2026KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
Total revenues$924 $853 $254 $139 $— $2,169 
Company restaurant expenses242 294 30 121 13 700 
General and administrative expenses88 53 56 12 114 324 
Franchise and property expenses18 9 13 1 — 41 
Franchise advertising and other services expense169 187 87 1 — 444 
Refranchising (gain) loss— — — — (1)(1)
Other (income) expense(2)(1)(3)6 6 6 
Total costs and expenses, net514 542 184 142 132 1,514 
Operating Profit (Loss)$410 $311 $70 $(4)$(132)$655 

Quarter ended 6/30/2025KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
Total revenues$849 $711 $239 $134 $— $1,933 
Company restaurant expenses216 217 7 116 4 560 
General and administrative expenses89 49 54 13 97 302 
Franchise and property expenses20 7 10 1 — 39 
Franchise advertising and other services expense162 176 90 1 — 428 
Refranchising (gain) loss— — — — (11)(11)
Other (income) expense— — (3)— (4)(7)
Total costs and expenses, net487 449 159 131 85 1,311 
Operating Profit (Loss)$363 $262 $80 $3 $(85)$622 


The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Summary of Results.  Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.

The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See Reconciliation of Non-GAAP Measurements to GAAP Results.


16

YUM! Brands, Inc.
Segment Results
(amounts in millions)
(unaudited)
Year to Date 6/30/2026KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
Total revenues$1,802 $1,650 $507 $269 $— $4,228 
Company restaurant expenses471 578 62 242 25 1,378 
General and administrative expenses174 106 116 25 225 646 
Franchise and property expenses37 15 31 2 — 85 
Franchise advertising and other services expense329 361 171 2 — 863 
Refranchising (gain) loss— — — — (2)(2)
Other (income) expense(2)— (6)8 (39)(39)
Total costs and expenses, net1,010 1,059 373 280 209 2,930 
Operating Profit (Loss)$793 $591 $135 $(11)$(209)$1,299 

Year to Date 6/30/2025KFC DivisionTaco Bell DivisionPizza Hut DivisionHabit Burger & Grill DivisionCorporate and UnallocatedConsolidated
Total revenues$1,622 $1,368 $470 $262 $(1)$3,720 
Company restaurant expenses411 421 11 230 7 1,081 
General and administrative expenses169 98 109 26 202 604 
Franchise and property expenses36 13 21 2 — 73 
Franchise advertising and other services expense311 333 179 1 — 824 
Refranchising (gain) loss— — — — (16)(16)
Other (income) expense— — (5)— (10)(15)
Total costs and expenses, net928 865 315 260 182 2,550 
Operating Profit (Loss)$694 $502 $155 $2 $(183)$1,170 


The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Summary of Results.  Corporate and unallocated expenses comprise items that are not allocated to segments for performance reporting purposes.

The Corporate and Unallocated column in the above tables includes, among other amounts, all amounts that we have deemed Special Items. See Reconciliation of Non-GAAP Measurements to GAAP Results.
17

Notes to the Condensed Consolidated Summary of Results, Condensed Consolidated Balance Sheets
and Condensed Consolidated Statements of Cash Flows
(amounts in millions)
(unaudited)

Amounts presented as of and for the quarters and years to date ended June 30, 2026 and 2025 are preliminary.

Certain General and administrative expenses allocations between KFC Division and Corporate and Unallocated for the prior periods have been restated to be comparable with the allocations for the quarter and year to date ended June 30, 2026.

We have classified certain assets and liabilities as held for sale at June 30, 2026 given the definitive agreements to sell Pizza Hut that were entered into during the quarter ended June 30, 2026.

(a)In 2025, we began a review of strategic options for the Pizza Hut brand. During the quarter and year to date ended June 30, 2026, we recorded charges of approximately $44 million and $81 million, respectively, to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review. Given the significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

(b)In 2025, we decided to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees. This involved relocating the KFC U.S. corporate office to the KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office. We also decided to relocate our YUM Corporate headquarters to a new space in Louisville, Kentucky and accordingly, donated our existing space. Costs incurred to date primarily include severance for the employees who chose not to relocate and consultant fees. As a result of these decisions, we recorded charges of approximately $10 million during the quarter ended June 30, 2025, and approximately $1 million and $17 million for the years to date ended June 30, 2026 and 2025, respectively, to Corporate and unallocated General and administrative expenses. Due to their scope and size, these charges have been reflected as Special Items.

(c)During the quarter ended March 31, 2026, we received approximately $44 million, net of legal expenses, related to a credit card interchange fee litigation settlement in which we were a plaintiff. This settlement was recorded to Unallocated Other (income) expense. Due to the nature and size of the settlement, including the years to which the litigation related, it has been reflected as a Special Item within Other income.

(d)On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S. (IS Holding), after failure by IS Gida to meet our standards. As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the first quarter of 2025. We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024. We recorded charges of $5 million and $7 million during the quarter and year to date ended June 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany. Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

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

Quarter endedYear to date
6/30/266/30/256/30/266/30/25
Tax Expense (Benefit) on Special Items Expense - Operating Profit$(11)$(7)$(9)$(14)
Tax (Benefit) - Income tax impacts from planned sale of Pizza Hut(359)— (359)— 
Tax (Benefit) - Intra-entity transfers and valuations of intellectual property
(79)— (101)— 
Tax Expense - Other Income tax impacts recorded as Special— — 13 — 
Tax Expense - Foreign tax reserve— 10 — 102 
Special Items Tax (Benefit) Expense
$(449)$3 $(456)$88 

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

18

Tax (Benefit) – Income tax impacts from the planned sale of Pizza Hut in the quarter and year to date ended June 30, 2026, reflects a $359 million net deferred tax benefit recorded upon the recognition of certain tax basis in entities expected to be sold. Such recognition was triggered upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut. The Pizza Hut sales are expected to close at significant book gains in the quarter ended September 30, 2026 resulting in the utilization of these deferred tax benefits.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, reflects tax benefits of $91 million and $113 million, respectively, resulting from an internal reorganization to consolidate the Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international businesses. As part of this reorganization, certain Pizza Hut intellectual property ("IP") rights from subsidiaries in the U.S. were transferred to international subsidiaries resulting in a step-up in amortizable tax basis of those IP rights. This reorganization began in the fourth quarter of 2025 in connection with our Pizza Hut strategic options review.

Additionally, Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, includes $12 million of tax expense representing an adjustment to the valuation allowance on tax credits previously granted by local Swiss tax authorities in connection with transferred IP rights in Switzerland. Previously recorded impacts associated with this IP transfer were recorded as Special Items.

Tax Expense - Other Income tax impacts recorded as Special in the year to date ended June 30, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia. Consistent with previously recorded impacts associated with our decision to exit Russia, this adjustment was recorded as a Special Item.

Tax Expense - Foreign tax reserve in the quarter and year to date ended June 30, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico. This expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.
19

Source: View Original Filing on SEC EDGAR

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