YUM BRANDS INC

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, 2025 (“2025 Form 10-K”).

As of September 30, 2026, 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 44,000 restaurants in more than 150 countries and territories, with 97% of these restaurants owned and operated by franchisees. The Company’s KFC and Taco Bell brands are global leaders of the chicken and Mexican-inspired food categories, respectively. The Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

As of September 30, 2026, YUM consisted ofthree 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 Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

In 2025, we began a review of strategic options for the Pizza Hut brand. The objective of the review was to create value for YUM, Pizza Hut and its franchisees by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market. As a result of this strategic review, during the quarter ended September 30, 2026, we sold the business in two separate transactions with Pizza Hut in mainland China being sold to Yum China Holdings, Inc. ("Yum China"), on August 7, 2026 and Pizza Hut, excluding mainland China, being sold to LongRange Capital, on September 1, 2026. The amounts reported within our Condensed Consolidated Financial Statements and notes thereto in the quarter and year to date ended September 30, 2026 include the operations of Pizza Hut prior to these sale dates and in the quarter and year to date ended September 30, 2025 include the operations of Pizza Hut for the entirety of those periods. Yum China will remain YUM's master franchisee for KFC and Taco Bell in mainland China.

As of September 1, 2026, the Company determined it has three reportable segments on a prospective basis as a result of the sales of the Pizza Hut business. The Company has included the results of our divested segment, Pizza Hut Division, through the sale dates in the accompanying Notes for comparability purposes.

YUM's fiscal year begins on January 1 and ends December 31 of each year, with each quarter comprised ofthree months. The majority of our U.S. subsidiaries and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks. Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.

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

The accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2025 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. Amounts presented in the Financial Statements and in the tabular presentations in these Notes are rounded to the nearest underlying whole number in millions in all instances. As a result, some totals and percentages may not recompute based on rounded figures as presented within the Financial Statements and these Notes.

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

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classifications for the quarter and year to date ended September 30, 2026. These reclassifications had no effect on previously reported Net Income.

Note 2- Restaurant Acquisitions

During 2026 and throughout 2025, we completed various restaurant acquisitions from franchisees, the most significant of which was the Taco Bell Southeast U.S. restaurant acquisition referenced below. In each transaction, the acquisition was accounted for as a business combination using the acquisition method of accounting. The allocation of the purchase price for each acquisition was based on management's analysis, which may have included analysis performed by third party valuation specialists, as of the respective acquisition dates.

The financial results of all acquired restaurants have been included in our Condensed Consolidated Financial Statements since the respective dates of the acquisitions, which individually and in the aggregate, did not materially impact our results for the quarters and years to date ended September 30, 2026 and 2025, respectively. Pro forma financial information for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Condensed Consolidated Financial Statements for both the 2026 and 2025 reporting periods.

Taco Bell Southeast U.S. Restaurant Acquisition

During the fourth quarter of 2025, we completed the acquisition of 128 Taco Bell restaurants across the Southeast U.S. from a franchisee. The acquisition provided YUM with an opportunity to improve and accelerate Taco Bell profitability, expand strategic leadership within the Taco Bell system and unlock significant unit development in the region. The purchase price to be allocated for accounting purposes was $666 million, which consisted of cash in the amount of $667 million, offset by the settlement of a net liability of $1 million related to our preexisting contractual relationship with the franchisee.

During the quarter ended June 30, 2026, we finalized our preliminary estimate of the fair value of identifiable net assets acquired. The cumulative adjustments to the preliminary estimate of identifiable net assets acquired (as recorded in the December 31, 2025 quarter of acquisition) were not significant.

Note 3 -Pizza Hut Divestitures

On August 7, 2026, we completed the sale of Pizza Hut in mainland China to Yum China, for $1.2 billion of proceeds. The Pizza Hut in mainland China sale resulted in a pre-tax gain of $1.1 billion, which represented the amount of consideration received over the carrying value of the net assets. Yum China will remain YUM’s master franchisee for KFC and Taco Bell in mainland China.

On September 1, 2026, we completed the sale of Pizza Hut excluding mainland China (“Pizza Hut Ex-China”) to LongRange Capital, a private equity firm, for $1.2 billion of net proceeds resulting in a pre-tax gain of $0.6 billion, which represented the amount of net consideration received over the carrying value of the net assets. Additionally, YUM has the opportunity to receive an earn-out from LongRange Capital of $75 million by 2030 based on future performance. We continue to provide Byte by Yum!, our proprietary technology platform, to Pizza Hut Ex-China subsequent to the sale. Additionally, following the closing of the transaction, we continue to provide certain enterprise technology and finance services to Pizza Hut Ex-China under a transition services agreement.

The total $1.7 billion pre-tax gain was recorded to Gain on Pizza Hut divestitures in our Condensed Consolidated Statement of Income in the quarter ended September 30, 2026.

The sale of Pizza Hut did not represent a strategic shift that will have a major effect on YUM’s operations and financial results and, therefore, did not qualify for presentation as a discontinued operation. We suspended certain depreciation and amortization on Pizza Hut assets while they were held for sale, the impact of which was not significant during the quarter and year to date ended September 30, 2026.

Note 4 -Earnings Per Common Share (“EPS”)

(a)These unexercised employee stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and stock options were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.

Note 5 -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, 2026 and 2025 as indicated below. All amounts exclude applicable transaction fees and excise taxes on share repurchases.

(a) Includes the effect of $15 million in share repurchases (0.1 million shares) with trade dates on, or prior to, September 30, 2026, but cash settlement dates subsequent to September 30, 2026.

In June 2026, our Board of Directors authorized share repurchases of up to $4 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through June 30, 2028. The new authorization took effect during the quarter ended September 30, 2026 upon the exhaustion of a prior authorization approved in May 2024. As of September 30, 2026, we have remaining capacity to repurchase up to $3.8 billion of Common Stock under the June 2026 authorization.

Changes in Accumulated other comprehensive loss (“AOCI”) are presented below.

Note 6 -Other (Income) Expense

(a) The year to date ended September 30, 2026, includes income of approximately $44 million related to a credit card interchange fee litigation settlement, net of legal expenses, in which we were a plaintiff. This settlement was recorded to Unallocated Other income.

Note 7 -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.

(a)Non-current operating lease liabilities of $1,154 million and $1,174 million as of September 30, 2026 and December 31, 2025, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

During the quarter ended September 30, 2026, we entered into an operating lease that has not yet commenced with estimated future nominal lease payments of approximately $165 million related to the relocation of our Taco Bell and Habit Burger & Grill headquarters. The lease is expected to commence in 2027 with a lease term, excluding renewals, through 2043.

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

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

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

Note 8 -Income Taxes

Our third quarter 2026 effective tax rate was unfavorably impacted by $466 million of tax expense recorded upon the divestitures of the Pizza Hut business. The year to date 2026 effective tax rate also reflected the following favorable factors:

•A net deferred tax benefit of $359 million recorded in the quarter ended June 30, 2026, reflecting the recognition of certain tax basis in entities that were expected to be sold with the Pizza Hut business. Such recognition was triggered upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut.

•Tax benefits of $113 million in the year to date ended September 30, 2026, associated with the 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. The tax benefits were the result of establishing deferred tax assets associated with a step-up in amortizable tax basis in intellectual property rights that were transferred from subsidiaries in the US to international subsidiaries as well as releasing valuation allowances against tax attributes which will be utilized to partially offset the taxable gains recognized in such transfers.

•Favorable impacts from newly effective provisions of the One Big Beautiful Bill Act ("OBBBA").

Our third quarter and year to date 2025 effective tax rate was impacted by the following factors:

•The impact of recording $3 million and $105 million in the quarter and year to date ended September 30, 2025, respectively, related to a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains triggered by a tax deconsolidation in Mexico in 2009. During the quarter ended March 31, 2025, a Mexican court ruled that such losses could not be utilized to offset the recapture gain. As such, the Company recorded the reserve and continues to record the ongoing foreign exchange and inflationary adjustments associated with the reserve. The Company is appealing the decision and does not expect resolution of this matter within twelve months.

•As a result of the enactment of the OBBBA, during the quarter ended September 30, 2025 we recorded $90 million of tax expense primarily associated with a change in management's judgment regarding our ability to utilize U.S. foreign tax credit related deferred tax assets prior to their expiration. Of this amount, $76 million related to taxable events and related positions prior to enactment with the remaining $14 million attributable to the post-enactment period.

•The above unfavorable factors were partially offset by the favorable impact of recognizing $63 million in tax benefit in the quarter ended September 30, 2025, associated with releasing reserves due to the favorable resolution of an audit.

Note 9 -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.

(a) Does not include a charge of $4 million to Unallocated Franchise revenues during the quarter ended September 30, 2025.

(a) Does not include a charge of $5 million to Unallocated Franchise revenues during the year to date ended September 30, 2025.

Contract Liabilities

Our contract liabilities are comprised of unamortized upfront fees received from franchisees and are presented within Accounts payable and other current liabilities and Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets. A summary of significant changes to the contract liability balance during 2026 is presented below.

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

Note 10 -Reportable Operating Segments

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

Other Segment Disclosures

Other Segment Disclosures

Revenues by Country(f)

(a)Amounts have not been allocated to any segment for performance reporting purposes.

(b)Corporate and unallocated G&A expenses include charges of $26 million and $107 million in the quarter and year to date ended September 30, 2026, respectively, and $8 million in both the quarter and year to date ended September 30, 2025, related to our Pizza Hut strategic options review. Corporate and unallocated G&A expenses include charges of $5 million and $37 million in the quarter and year to date ended September 30, 2025, respectively, related to our resource optimization program and charges of $3 million during the quarter ended September 30, 2025 and $1 million and $20 million for the years to date ended September 30, 2026 and 2025, respectively, related to our brand headquarters consolidation.

(c)Unallocated Company restaurant expenses include amortization of reacquired franchise rights.

(d)Unallocated Other income (expense) includes income of $44 million, net of legal expenses, in the year to date ended September 30, 2026, related to a credit card interchange fee litigation settlement in which we were a plaintiff.

(e)The amounts of depreciation and amortization disclosed by reportable segment are primarily included within the segment expense captions of Company restaurant expenses and G&A expenses.

(f)The United States and United Kingdom represented 10% or more of our total revenues for all periods presented.

Note 11 -Pension Benefits

We sponsor qualified and supplemental (non-qualified) noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The most significant of these plans, the YUM Retirement Plan (the “Plan”), is funded. We fund our other U.S. plans as benefits are paid. Our two significant U.S. plans, including the Plan and a supplemental plan, were previously amended such that any salaried employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those plans. Additionally, these two plans in the U.S. are currently closed to new hourly participants.

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

(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 12 -Short-term Borrowings and Long-term Debt

The Term Loan A Facility and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the March 15, 2028 maturity of the existing Term Loan B Facility if more than $250 million of such Term Loan B remains outstanding as of such date or (iii) the date that is 91 days prior to the June 1, 2027 maturity of the existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remain outstanding as of such date. Given the $750 million in Subsidiary Senior Unsecured Notes outstanding at September 30, 2026, the maturity date of the

Term Loan A Facility and Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027. As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of September 30, 2026.

Details of our Short-term borrowings and Long-term debt as of December 31, 2025 can be found within our 2025 Form 10-K.

Cash paid for interest during the years to date ended September 30, 2026 and 2025, was $375 million and $364 million, respectively.

Note 13 -Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in foreign currency exchange rates, interest rates and deferred compensation liabilities. As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with major financial institutions carefully selected based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At September 30, 2026, all of the counterparties to our derivative instruments had investment grade ratings according to the three major ratings agencies. To date, all counterparties have performed in accordance with their contractual obligations.

Foreign Currency Contracts

We utilized foreign currency forward contracts with a U.S. dollar notional amount of approximately $75 million to reduce the foreign currency exposure relating to our net investment in certain Indian rupee functional currency operations during the quarter ended September 30, 2026. These forward contracts are designated as a net investment hedge and the related mark-to-market adjustments are being recorded as a cumulative translation adjustment within AOCI. These foreign currency forward contracts did not have a material impact on our Condensed Consolidated Financial Statements for the quarter or year to date ended September 30, 2026.

Interest Rate Swaps

We have utilized interest rate swaps to fix the interest rate on $1.5 billion of borrowings, primarily under our Term Loan B Facility, through March 2028. The interest rate swaps have been designated as a cash flow hedge and to date have been highly effective. The current rate on the swapped portion of the Term Loan B Facility (excluding debt issuance costs) is 5.09%.

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.

Gains and losses on these interest rate swaps recognized in OCI and reclassifications from AOCI into Net Income were as follows:

As of September 30, 2026, the estimated net gain included in AOCI related to our interest rate swaps that will be reclassified into earnings in the next 12 months is $15 million, based on current Secured Overnight Financing (“SOFR”) interest rates.

Total Return Swaps

We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our Executive Income Deferral (“EID”) plan. While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes. As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities. The fair value associated with the total return swaps as of both September 30, 2026 and December 31, 2025, was not significant.

See Note 14 for the fair value of our derivative assets and liabilities.

Note 14 -Fair Value Disclosures

As of September 30, 2026, the carrying values of cash and cash equivalents, restricted cash, 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:

(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 which are required to be measured at fair value on a recurring basis (see Note 13 for discussion regarding derivative instruments). The following table presents the fair values for those interest rate swaps measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.

The fair value of the Company's interest rate swaps was 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.

Note 15 -Contingencies

Internal Revenue Service Proposed Adjustment

Following an Internal Revenue Service (“IRS”) audit for the 2013 to 2015 fiscal years, we were unable to resolve underpayments of tax that the IRS proposed resulting from that audit using the IRS Appeals process, a pre-litigation, alternative dispute resolution tool. The IRS asserts an underpayment of tax of approximately $2.1 billion plus $418 million in penalties for fiscal year 2014. Both amounts are subject to interest, with interest of approximately $2.4 billion accruing through September 30, 2026. Those amounts relate primarily to a series of reorganizations that we undertook in 2014 in connection with the business realignment of our corporate and management reporting structure along brand lines. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion.

We disagree with the IRS’s position and are contesting that position vigorously. On June 4, 2025, we filed a petition in the United States Tax Court disputing the IRS's position as set forth in a Notice of Deficiency. The IRS filed its Answer on September 12, 2025. The litigation is ongoing.

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

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

Lease Guarantees

As a result of having assigned our interest in obligations under real estate leases as a condition to the refranchising of certain Company-owned restaurants, and guaranteeing certain other leases, we are frequently secondarily liable on lease agreements. These leases have varying terms, the latest of which expires in 2065. As of September 30, 2026, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $300 million. The present value of these potential payments discounted at our pre-tax cost of debt at September 30, 2026, was approximately $250 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, 2026, was not material.

Legal Proceedings

We are subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normal course of business. An accrual is recorded with respect to claims or contingencies for which a loss is determined to be probable and reasonably estimable.

India Regulatory Matter

Yum! Restaurants India Private Limited (“YRIPL”), a YUM subsidiary that operates KFC restaurants in India and which operated Pizza Hut restaurants in India prior to YUM's divestiture of the Pizza Hut business, is the subject of a regulatory enforcement action in India (the “Action”). The Action alleges, among other things, that certain KFC and Pizza Hut subsidiaries 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 $115 million. Of this amount, $110 million relates to the alleged failure to invest a total of $80 million in India within an initial seven-year period. We have been advised by external counsel that the order is flawed and have filed a writ petition with the Delhi High Court, which granted an interim stay of the penalty order on March 5, 2020. In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed. Hearings before an administrative tribunal as well as the Delhi High Court have been continued and rescheduled, and the stay order remains in effect. We deny liability and intend to continue vigorously defending this matter. We do not consider the risk of any significant loss arising from this order to be probable.

Other Matters

We are currently engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any, cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion 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.