Press Release

LOUISVILLE, Ky.--(BUSINESS WIRE)--

Yum! Brands Inc. (NYSE: YUM) today reported results for the second quarter ended June 12, 2010.

Earnings Per Share (EPS) was $0.58, excluding special items, representing 17% growth. On a reported basis, EPS was $0.59 or 6% below last year because the company lapped a one-time gain of $68 million arising from the acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFC business in Shanghai, China in the second quarter of 2009.

SECOND-QUARTER HIGHLIGHTS

• Worldwide operating profit grew 21% prior to foreign currency translation, including +33% in China, +10% in the U.S., and +7% in YRI.
• Worldwide system sales growth prior to foreign currency translation of 4% including +15% in China, +4% in YRI, and +1% in the U.S.
• Worldwide restaurant margin improvement of over 1 percentage point driven by China and the U.S.
• Share repurchases totaled $115 million for 2.8 million shares at an average price of $40 per share.

FULL YEAR OUTLOOK

The Company raised its full-year 2010 EPS forecast from $2.39 to $2.43 per share or 12% growth prior to special items, based on strong first half performance.

David C. Novak, Chairman and CEO said, “I’m pleased to report we expect to deliver 12% EPS growth this year, making 2010 the 9^th consecutive year we meet or exceed our annual target of at least 10%. We followed up a strong first quarter with second quarter EPS growth of 17%, before special items. This was fueled by profit growth in each of our three divisions, including exceptional growth of 33% in China. Overall, system sales grew by 4% and worldwide operating profit increased 21%, prior to foreign currency translation benefit and special items. A key driver of our overall growth continues to be new unit development in China and Yum! Restaurants International. We continue to expect to open about 1,400 international units this year and remain the industry’s leading international new unit developer.

“We are also pleased to report 10% operating profit growth in the U.S., despite flat same-store-sales. Our primary focus is to drive same-store-sales growth during the balance of year given the challenging consumer environment. At Yum! Restaurants International, we increased system sales by 4% prior to foreign currency translation benefit. We expect stronger sales and profit growth for the balance of the year at YRI.

“Overall, we are encouraged with our strong performance in a difficult macro-economic environment. Longer term, we continue to drive aggressive, international expansion while maintaining our industry-leading return on invested capital as we provide cash to shareholders through dividends and share repurchases.”

CHINA DIVISION

• China Division system sales growth of 15% was driven by new unit development of 12% and same-store-sales growth of 4%.
  • China opened 59 new restaurants in the second quarter and year-to-date 155, further strengthening the company’s leadership position.

• Restaurant margin increased by 1.7 percentage points driven primarily by same-store-sales growth and commodity cost deflation of $14 million, partially offset by wage inflation.
• We continue to expect moderate year-over-year margin improvement for the full year as we expect labor and commodity inflation in the second half of 2010.
• China Division includes solely the results of our operations in mainland China.

YUM! RESTAURANTS INTERNATIONAL (YRI) DIVISION

• YRI system sales grew 4%, excluding foreign currency translation, for the second quarter driven primarily by new unit development. Our emerging markets led the way with 10% system sales growth while system sales in developed markets were flat.
• Same-store-sales grew 1% for the second quarter including a 1 percentage point benefit from the timing of Chinese New Year.
• We opened 175 new units in almost 50 countries with our franchise partners opening 89% of these new units.
• Operating profit grew 7% prior to foreign currency translation, primarily driven by new unit development.
• On July 1^st, the company completed the exercise of our option with our Russian partner and we now have full management control of the KFC-Rostik’s brand in Russia and the Commonwealth of Independent States (CIS). This market includes more than 150 co-branded KFC-Rostiks restaurants across Russia and the CIS, of which we now own approximately 50 with the remainder owned by franchisees.
• Foreign currency translation positively impacted operating profit by $14 million for the second quarter and $28 million year-to-date.

U.S. DIVISION

• Same-store-sales were flat including increases of 8% at Pizza Hut and 1% at Taco Bell, offset by a decline of 7% at KFC.
• Restaurant margin increased 1.4 percentage points primarily due to improved margin performance at KFC, the benefit of refranchising, and lower insurance expense.
• Operating profit increased 10% driven primarily by lower closure and impairment expense, higher restaurant margin, and G&A savings.

U.S. BUSINESS REFRANCHISING UPDATE

We continue to pursue the refranchising of a substantial portion of our U.S. businesses, principally Pizza Hut and KFC. Year to date we have sold 71 restaurants. Since the inception of our refranchising program in late 2007, we have sold over 1,300 units across all the brands. We expect to complete our U.S. refranchising efforts during 2011.

REMINDER - DIVISION REPORTING REALIGNMENT

Beginning in the first quarter of 2010, Thailand and KFC Taiwan, previously part of China Division, are being reported as part of YRI. The China Division includes solely the results of our mainland China business. While our consolidated results are not impacted, our historical segment financial information for YRI and China Division has been restated for 2009 for consistent presentation.

CONFERENCE CALL

Yum! Brands Inc. will host a conference call to review the company’s financial performance and strategies at 9:15 a.m. ET Wednesday, July 14, 2010. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers.

The call will be available for playback beginning at noon Eastern Time Wednesday, July 14, through midnight Wednesday, July 28, 2010. To access the playback, dial 800/642-1687 in the United States and 706/645-9291 internationally. The playback pass code is 84264468.

The webcast and the playback can be accessed via the internet by visiting Yum! Brands’ Web site, www.yum.com/investors and selecting “Q2 2010 Earnings Conference Call” under “Investors: News and Presentations.” A podcast will be available within 24 hours.

ADDITIONAL INFORMATION ONLINE

Second quarter end dates for each division, restaurant-count details, and definitions of terms including Key Markets are available online at www.yum.com under “Investors”.

This announcement, any related announcements and the related webcast 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 can be identified by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected. Factors that can cause our actual results to differ materially include, but are not limited to: economic and political conditions in the countries where we operate; currency exchange and interest rates; commodity, labor and other operating costs; competition, consumer preferences or perceptions; the impact of any widespread illness or food borne illness; the effectiveness of our operating initiatives and marketing; new-product and concept development by us and our competitors; the success of our strategies for refranchising and international development; the continued viability of our franchise and license operators; our ability to secure and maintain distribution and adequate supply to our restaurants; publicity that may impact our business and/or industry; pending or future legal claims; our effective tax rates; our actuarially determined casualty loss estimates; government regulations; and accounting policies and practices. 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 Annual Report on Form 10-K) for additional detail about factors that could affect our financial and other results. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. 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.

Yum! Brands, Inc., based in Louisville, Kentucky, is the world’s largest restaurant company in terms of system restaurants, with more than 37,000 restaurants in over 110 countries and territories. The company is ranked #216 on the Fortune 500 List, with revenues of nearly $11 billion in 2009. Four of the company’s restaurant brands – KFC, Pizza Hut, Taco Bell and Long John Silver’s – are the global leaders of the chicken, pizza, Mexican–style food and quick–service seafood categories, respectively. Outside the United States in 2009, the Yum! Brands system opened more than four new restaurants each day of the year, making it a leader in international retail development.

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Source: Yum! Brands Inc.

Yum! Brands Inc.

Analysts:

Tim Jerzyk, Senior Vice President Investor Relations, 888-298-6986

or

Steve Schmitt, Director Investor Relations, 888-298-6986

or

Media:

Amy Sherwood, Vice President Public Relations, 502-874-8200