LOUISVILLE, Ky.--(BUSINESS WIRE)--Yum! Brands, Inc. (NYSE: YUM) today reported results for the second quarter ended June 11, 2016, including GAAP EPS of $0.81 and EPS excluding Special Items of $0.75.

Core operating profit growth figures exclude foreign currency translation ("F/X") and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide reported results. See reconciliation of non-GAAP measurements to GAAP results within this release for further details.

SECOND-QUARTER HIGHLIGHTS

Opened 373 new restaurants worldwide; 72% of international development occurred in emerging markets.

On track to finalize China separation with targeted completion date around October 31, 2016.

Foreign currency translation negatively impacted operating profit by $16 million.

% Change System Sales

(Ex F/X) Same-Store

Sales Units GAAP

Operating

Profit Core

Operating

Profit China Division +3 Even +6 +1 +6 KFC Division +6 +2 +3 Even +6 Pizza Hut Division +1 Even +1 +6 +7 Taco Bell Division +2 (1) +3 (1) (1) Worldwide +3 Even +3 +32 +7

Second Quarter Year-to-Date 2016 2015 % Change 2016 2015 % Change EPS Excluding Special Items $0.75 $0.69 9% $1.71 $1.50 14% Special Items Gain/(Loss)1 $0.06 $(0.16) NM $0.03 $(0.16) NM EPS $0.81 $0.53 54% $1.74 $1.34 30% 1 See Reconciliation of Non-GAAP Measurements to GAAP Results for further detail of Special Items. Special Items in 2016 primarily related to gains associated with Pizza Hut U.S. refranchising, costs associated with the agreement reached in 2015 with KFC U.S. franchisees and costs associated with the planned separation of our China business and the Yum! recapitalization. Special Items in 2015 are primarily related to a non-cash charge associated with refranchising our Mexico business. Note: All comparisons are versus the same period a year ago. Effective January 2016, the Company’s India business integrated its three restaurant brands into our global KFC, Pizza Hut and Taco Bell Divisions. Prior year figures have been restated to present comparable results. Full-year GAAP operating profit growth guidance is not provided due to our inability to forecast when gains and losses related to refranchising transactions classified as Special Items will occur, as the timing of these transactions is often outside our control, and the resulting gains and losses are dependent upon future market conditions. 2016 core operating profit growth guidance assumes no separation of the China business.

GREG CREED COMMENTS

Greg Creed, CEO, said “Yum! Brands delivered second-quarter core operating profit growth of 7% and EPS growth, excluding Special Items, of 9%. Given our strong first-half results and current trends in China, I’m pleased to raise our full-year core operating profit growth forecast to at least 14% from 12% previously. I’m particularly pleased with the continued sales momentum at KFC China, which delivered better-than-expected same-store sales growth of 3%. This represents our fourth-consecutive quarter of positive same-store sales growth at KFC China despite the second quarter being our most difficult of the year from a historical sales overlap standpoint. Importantly, our China Division is off to a good start in the third quarter for both KFC and Pizza Hut Casual Dining, including a return to positive same-store sales at Pizza Hut Casual Dining in recent weeks.

Outside of China, challenging industry conditions in the U.S. contributed to soft sales results. However, our three brand divisions in the aggregate delivered core operating profit growth largely in-line with our expectations and remain on track to deliver against their full-year core operating profit growth targets. We’re confident in our plans to drive second-half sales improvement led by a continued focus on innovation, value and our core products.

This is a transformational year for our company as we remain on track to finalize the separation of our China business with a targeted completion date around October 31, 2016, ultimately creating two powerful, independent, focused growth companies. Our capital structure is fully in place and we plan to return a significant amount of capital to shareholders both prior to and after the spin. I look forward to sharing additional details on the transformative initiatives we are undertaking as we become a more heavily franchised company at our New York investor conference on Tuesday, October 11th."

CHINA DIVISION

Second Quarter Year-to-Date %/ppts Change %/ppts Change 2016 2015 Reported Ex F/X 2016 2015 Reported Ex F/X System Sales Growth (1) +3 +2 +7 Same-Store Sales Growth (%) Even (10) NM NM +2 (11) NM NM Franchise & License Fees ($MM) 30 28 +7 +12 55 49 +12 +18 Restaurant Margin (%) 15.7 14.6 1.1 1.1 18.7 16.4 2.3 2.3 Operating Profit ($MM) 147 144 +1 +6 403 334 +20 +26 Operating Margin (%) 9.2 8.8 0.4 0.4 13.9 11.6 2.3 2.3

China Division system sales increased 3%, excluding foreign currency translation. Same-store sales were even, with an increase of 3% at KFC, offset by a decline of 11% at Pizza Hut Casual Dining.

system sales increased 3%, excluding foreign currency translation. China Division opened 72 new units during the quarter.

China Units Q2 2016 % Change2 Restaurants1 7,246 +6 KFC 5,039 +3 Pizza Hut Casual Dining 1,610 +16 Home Service 339 +23 1 Total includes East Dawning and Little Sheep units. 2 Represents year-over-year change.

Operating profit was negatively impacted by an additional $14 million in closures and impairment expense versus prior year, as well as a $4 million expense related to our RGM convention. These expenses were partially offset by a benefit from recent value-added tax reform in China, which went into effect on May 1, 2016.

Foreign currency translation negatively impacted operating profit by $7 million.

Consistent with prior years, China Division's second quarter includes March, April and May results.

KFC DIVISION

Second Quarter Year-to-Date %/ppts Change %/ppts Change 2016 2015 Reported Ex F/X 2016 2015 Reported Ex F/X Restaurants 15,003 14,619 +3 N/A 15,003 14,619 +3 N/A System Sales Growth +1 +6 (1) +5 Same-Store Sales Growth (%) +2 +2 NM NM +1 +3 NM NM Franchise & License Fees ($MM) 194 191 +1 +5 389 389 - +6 Restaurant Margin (%) 14.5 14.5 - - 14.7 14.5 0.2 0.1 Operating Profit ($MM) 149 149 - +6 309 315 (2) +5 Operating Margin (%) 21.0 20.5 0.5 0.5 23.1 22.7 0.4 0.3

KFC Division system sales increased 6%, excluding foreign currency translation.

Second Quarter (% Change) Int'l Emerging Markets Int'l Developed Markets U.S. System Sales Growth (Ex F/X) +10 +4 Even Same-Store Sales Growth +2 +1 +2

KFC Division opened 132 new international restaurants in 42 countries, including 90 units in emerging markets. 88% of new international units were opened by franchisees.

Operating margin increased 0.5 percentage points driven by new-unit development.

Foreign currency translation negatively impacted operating profit by $9 million, as approximately 90% of division profits are generated outside the U.S.

KFC MARKETS1 Percent of KFC

System Sales 2 SYSTEM Sales Growth Ex F/X Second Quarter (%) Year-to-Date (%) Emerging Markets Asia (e.g. Malaysia, Indonesia, Philippines) 7% +11 +10 Africa 6% +8 +8 Latin America (e.g. Mexico, Peru) 6% +5 +5 Middle East / North Africa 6% +4 +4 Russia 5% +33 +31 Thailand 3% +6 +6 Continental Europe (e.g. Poland) 3% +17 +17 India 1% (1) (1) Developed Markets U.S. 24% Even Even Australia 10% +4 +5 Asia (e.g. Japan, Korea, Taiwan) 9% +6 +6 U.K. 9% +2 +1 Continental Europe (e.g. France, Germany) 7% +9 +9 Canada 3% +5 +5 Latin America (e.g. Puerto Rico) 1% (5) (4) 1 See website www.yum.com/investors for a list of the countries within each of the markets. 2 Reflects Full Year 2015.

PIZZA HUT DIVISION

Second Quarter Year-to-Date %/ppts Change %/ppts Change 2016 2015 Reported Ex F/X 2016 2015 Reported Ex F/X Restaurants 14,176 14,013 +1 N/A 14,176 14,013 +1 N/A System Sales Growth Even +1 Even +3 Same-Store Sales Growth (%) Even Even NM NM +1 Even NM NM Franchise & License Fees ($MM) 121 121 +1 +3 254 249 +2 +4 Restaurant Margin (%) 9.4 9.9 (0.5) (0.9) 10.3 10.8 (0.5) (0.9) Operating Profit ($MM) 64 60 +6 +7 151 141 +7 +8 Operating Margin (%) 25.8 22.5 3.3 3.0 29.5 26.2 3.3 2.9

Pizza Hut Division system sales increased 1%, excluding foreign currency translation.

Second Quarter (% Change) Int'l Emerging Markets Int'l Developed Markets U.S. System Sales Growth (Ex F/X) +4 +1 Even Same-Store Sales Growth (1) (1) +1

Pizza Hut Division opened 84 new international restaurants in 38 countries, including 45 units in emerging markets. 94% of new international units were opened by franchisees.

Operating margin increased 3.3 percentage points, driven by reduced G&A.

Foreign currency translation negatively impacted operating profit by less than $1 million.

PIZZA HUT MARKETS1 Percent of Pizza Hut

System Sales2 SYSTEM Sales Growth Ex F/X Second Quarter (%) Year-to-Date (%) Emerging Markets Latin America (e.g. Mexico, Peru) 7% +8 +9 Asia (e.g. Malaysia, Indonesia, Philippines) 5% +5 +3 Middle East / North Africa 5% (2) +1 Continental Europe (e.g. Poland) 1% +10 +12 India 1% (7) (6) Developed Markets U.S. 55% Even +2 Asia (e.g. Japan, Korea, Taiwan) 8% (7) (7) U.K. 7% +5 +5 Continental Europe (e.g. France, Germany) 5% +8 +7 Canada 3% +9 +10 Australia 2% (3) (7) Latin America (e.g. Puerto Rico) 1% Even (2) 1 See website www.yum.com/investors for a list of the countries within each of the markets. 2 Reflects Full Year 2015.

TACO BELL DIVISION

Second Quarter Year-to-Date %/ppts Change %/ppts Change 2016 2015 Reported Ex F/X 2016 2015 Reported Ex F/X Restaurants 6,468 6,263 +3 N/A 6,468 6,263 +3 N/A System Sales Growth +2 +2 +3 +3 Same-Store Sales Growth (%) (1) +6 NM NM Even +6 NM NM Franchise & License Fees ($MM) 110 106 +4 +4 211 202 +5 +5 Restaurant Margin (%) 22.3 22.9 (0.6) (0.7) 21.6 21.3 0.3 0.3 Operating Profit ($MM) 139 140 (1) (1) 258 254 +1 +1 Operating Margin (%) 29.9 29.3 0.6 0.6 29.0 28.0 1.0 1.0

Taco Bell Division system sales increased 2%, driven by 3% unit growth and partially offset by a 1% decline in same-store sales.

system sales increased 2%, driven by 3% unit growth and partially offset by a 1% decline in same-store sales. Taco Bell Division opened 48 new restaurants; 88% of these new units were opened by franchisees.

Restaurant margin was 22.3%, a decrease of 0.6 percentage points driven by higher labor costs and store level investments. This was partially offset by favorable commodities pricing.

Operating margin increased 0.6 percentage points driven by new-unit development and reduced G&A.

SPECIAL ITEMS / SHARE REPURCHASE / RECAPITALIZATION UPDATE

During the first quarter of 2015, we reached an agreement with our KFC U.S. franchisees that gave us brand marketing control, as well as an accelerated path to expanded menu offerings, improved assets and an enhanced customer experience. In connection with this agreement, we recognized a Special Items charge of $8 million during the quarter, primarily related to the funding of investments for new back-of-house equipment for franchisees.

During the quarter, we incurred a Special Items charge of $10 million for costs related to the planned separation of our China business and the Yum! recapitalization.

During the quarter, we refranchised 82 units outside of China, primarily related to Pizza Hut U.S., for proceeds of $83 million. We recorded refranchising gains of $53 million in Special Items.

Year-to-date through July 12, 2016, we repurchased 31.4 million shares totaling $2.4 billion at an average price of $77. Since we announced our intention to separate the China business, we have repurchased approximately $3.3 billion of shares at an average price of $76, reducing our share count by 42.9 million shares. This is part of our previously announced plan to return $6.2 billion of capital to shareholders in connection to the separation of our China business.

We have completed our recapitalization consisting of $6.9 billion of new debt in May and June 2016; $4.6 billion of this new debt was issued subsequent to the end of our second quarter.

CONFERENCE CALL

Yum! Brands, Inc. will host a conference call to review the Company's financial performance and strategies at 9:15 a.m. Eastern Time Thursday, July 14, 2016. The number is 877/815-2029 for U.S. callers and 706/645-9271 for international callers, conference ID 34811599.

The call will be available for playback beginning at 12:30 p.m. Eastern Time Thursday, July 14, 2016 through midnight Wednesday, August 10, 2016. To access the playback, dial 855/859-2056 in the U.S. and 404/537-3406 internationally, conference ID 34811599.

The webcast and the playback can be accessed via the internet by visiting Yum! Brands' website, www.yum.com/investors and selecting “Q2 2016 Earnings Conference Call” under “Events & Presentations.”

ADDITIONAL INFORMATION ONLINE

Quarter end dates for each division, restaurant-count details and definitions of terms are available online at www.yum.com/investors.

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,” “will,” “should,” “forecast,” “outlook” or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements reflect our current expectations, estimates or projections concerning future results or events, including, without limitation, statements regarding the intended capital return to shareholders as well as the related borrowing required to fund such capital return, the planned separation of the Yum! Brands and Yum! China businesses, the timing of any such separation, the future earnings and performance as well as capital structure of Yum! Brands, Inc. or any of its businesses, including the Yum! Brands and Yum! China businesses on a standalone basis if the separation is completed. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved. 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. Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to return capital to shareholders at the times and in the amounts currently anticipated, if at all, as well as the corresponding costs of borrowing to fund such capital return as well as other costs; whether the separation of the Yum! Brands and Yum! China businesses is completed, as expected or at all, and the timing of any such separation; whether the operational and strategic benefits of the separation can be achieved; whether the costs and expenses of the separation can be controlled within expectations, including potential tax costs; as well as other risks. 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. 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 or Form 10-K) for additional detail about factors that could affect our financial and other results. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included on our website at www.yum.com/investors.

Yum! Brands, Inc., based in Louisville, Kentucky, has nearly 43,000 restaurants in almost 140 countries and territories. Yum! is ranked #218 on the Fortune 500 List with revenues of over $13 billion in 2015 and is one of the Aon Hewitt Top Companies for Leaders in North America. The Company’s restaurant brands - KFC, Pizza Hut and Taco Bell - are the global leaders of the chicken, pizza and Mexican-style food categories. Worldwide, the Yum! Brands system opens over six new restaurants per day on average, making it a leader in global retail development.

YUM! Brands, Inc. Condensed Consolidated Summary of Results (amounts in millions, except per share amounts) (unaudited) Quarter ended % Change Year to date % Change 6/11/16 6/13/15 B/(W) 6/11/16 6/13/15 B/(W) Company sales $ 2,554 $ 2,659 (4) $ 4,719 $ 4,838 (2) Franchise and license fees and income 454 446 (2) 908 889 2 Total revenues 3,008 3,105 (3) 5,627 5,727 (2) Company restaurant expenses Food and paper 764 841 9 1,413 1,529 8 Payroll and employee benefits 603 602 — 1,089 1,095 1 Occupancy and other operating expenses 779 805 3 1,376 1,421 3 Company restaurant expenses 2,146 2,248 5 3,878 4,045 4 General and administrative expenses 365 353 (3) 651 648 (1) Franchise and license expenses 50 47 (8) 98 81 (20) Closures and impairment (income) expenses 37 24 (60) 40 27 (52) Refranchising (gain) loss (53 ) 68 NM (60 ) 58 NM Other (income) expense (28 ) (6 ) NM (35 ) (9 ) NM Total costs and expenses, net 2,517 2,734 8 4,572 4,850 6 Operating Profit 491 371 32 1,055 877 20 Interest expense, net 40 33 (22) 77 67 (15) Income before income taxes 451 338 33 978 810 21 Income tax provision 116 102 (13) 248 213 (16) Net income - including noncontrolling interests 335 236 42 730 597 22 Net income (loss) - noncontrolling interests (4 ) 1 NM — — 90 Net income - YUM! Brands, Inc. $ 339 $ 235 44 $ 730 $ 597 22 Effective tax rate 25.8 % 30.4 % 4.6 ppts. 25.4 % 26.3 % 0.9 ppts. Basic EPS Data EPS $ 0.82 $ 0.54 53 $ 1.77 $ 1.36 30 Average shares outstanding 410 437 6 413 437 6 Diluted EPS Data EPS $ 0.81 $ 0.53 54 $ 1.74 $ 1.34 30 Average shares outstanding 417 445 6 420 446 6 Dividends declared per common share $ 0.46 $ 0.82 $ 0.92 $ 0.82

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc. CHINA DIVISION Operating Results (amounts in millions) (unaudited) Quarter ended % Change Year to date % Change 6/11/16 6/13/15 B/(W) 6/11/16 6/13/15 B/(W) Company sales $ 1,558 $ 1,608 (3) $ 2,836 $ 2,843 — Franchise and license fees and income 30 28 7 55 49 12 Total revenues 1,588 1,636 (3) 2,891 2,892 — Company restaurant expenses Food and paper 462 515 10 847 907 7 Payroll and employee benefits 342 333 (3) 587 577 (2) Occupancy and other operating expenses 511 526 3 873 892 2 Company restaurant expenses 1,315 1,374 4 2,307 2,376 3 General and administrative expenses 102 100 (2) 168 168 — Franchise and license expenses 5 5 1 9 9 3 Closures and impairment (income) expenses 31 17 (92) 31 19 (70) Other (income) expense (12 ) (4 ) NM (27 ) (14 ) 84 Total costs and expenses, net 1,441 1,492 3 2,488 2,558 3 Operating Profit $ 147 $ 144 1 $ 403 $ 334 20 Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 29.6 32.0 2.4 ppts. 29.8 31.9 2.1 ppts. Payroll and employee benefits 21.9 20.7 (1.2 ppts.) 20.7 20.3 (0.4 ppts.) Occupancy and other operating expenses 32.8 32.7 (0.1 ppts.) 30.8 31.4 0.6 ppts. Restaurant margin 15.7 % 14.6 % 1.1 ppts. 18.7 % 16.4 % 2.3 ppts. Operating margin 9.2 % 8.8 % 0.4 ppts. 13.9 % 11.6 % 2.3 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc. KFC DIVISION Operating Results (amounts in millions) (unaudited) Quarter ended % Change Year to date % Change 6/11/16 6/13/15 B/(W) 6/11/16 6/13/15 B/(W) Company sales $ 518 $ 535 (3) $ 948 $ 999 (5) Franchise and license fees and income 194 191 1 389 389 — Total revenues 712 726 (2) 1,337 1,388 (4) Company restaurant expenses Food and paper 176 183 4 321 344 7 Payroll and employee benefits 122 123 1 225 230 3 Occupancy and other operating expenses 145 151 4 263 280 6 Company restaurant expenses 443 457 3 809 854 5 General and administrative expenses 94 97 4 170 179 5 Franchise and license expenses 23 21 (9) 44 38 (16) Closures and impairment (income) expenses 3 3 (33) 5 3 (79) Other (income) expense — (1 ) (71) — (1 ) (75) Total costs and expenses, net 563 577 3 1,028 1,073 4 Operating Profit $ 149 $ 149 — $ 309 $ 315 (2) Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 34.0 34.4 0.4 ppts. 33.9 34.5 0.6 ppts. Payroll and employee benefits 23.4 22.9 (0.5 ppts.) 23.6 23.0 (0.6 ppts.) Occupancy and other operating expenses 28.1 28.2 0.1 ppts. 27.8 28.0 0.2 ppts. Restaurant margin 14.5 % 14.5 % — 14.7 % 14.5 % 0.2 ppts. Operating margin 21.0 % 20.5 % 0.5 ppts. 23.1 % 22.7 % 0.4 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc. PIZZA HUT DIVISION Operating Results (amounts in millions) (unaudited) Quarter ended % Change Year to date % Change 6/11/16 6/13/15 B/(W) 6/11/16 6/13/15 B/(W) Company sales $ 125 $ 145 (14) $ 257 $ 289 (11) Franchise and license fees and income 121 121 1 254 249 2 Total revenues 246 266 (7) 511 538 (5) Company restaurant expenses Food and paper 35 40 14 71 80 12 Payroll and employee benefits 39 45 12 80 89 10 Occupancy and other operating expenses 40 46 14 80 89 10 Company restaurant expenses 114 131 13 231 258 10 General and administrative expenses 56 63 9 106 120 11 Franchise and license expenses 10 9 (13) 20 18 (13) Closures and impairment (income) expenses 2 3 32 3 3 8 Other (income) expense — — NM — (2 ) (98) Total costs and expenses, net 182 206 11 360 397 9 Operating Profit $ 64 $ 60 6 $ 151 $ 141 7 Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 27.5 27.5 — 27.4 27.7 0.3 ppts. Payroll and employee benefits 31.5 30.9 (0.6 ppts.) 31.3 30.8 (0.5 ppts.) Occupancy and other operating expenses 31.6 31.7 0.1 ppts. 31.0 30.7 (0.3 ppts.) Restaurant margin 9.4 % 9.9 % (0.5 ppts.) 10.3 % 10.8 % (0.5 ppts.) Operating margin 25.8 % 22.5 % 3.3 ppts. 29.5 % 26.2 % 3.3 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc. TACO BELL DIVISION Operating Results (amounts in millions) (unaudited) Quarter ended % Change Year to date % Change 6/11/16 6/13/15 B/(W) 6/11/16 6/13/15 B/(W) Company sales $ 353 $ 371 (5) $ 678 $ 707 (4) Franchise and license fees and income 110 106 4 211 202 5 Total revenues 463 477 (3) 889 909 (2) Company restaurant expenses Food and paper 91 103 11 174 198 12 Payroll and employee benefits 100 101 1 197 199 1 Occupancy and other operating expenses 83 82 (2) 160 160 — Company restaurant expenses 274 286 4 531 557 4 General and administrative expenses 45 47 5 91 91 — Franchise and license expenses 5 4 (70) 9 6 (46) Closures and impairment (income) expenses 1 1 47 1 2 63 Other (income) expense (1 ) (1 ) 50 (1 ) (1 ) 23 Total costs and expenses, net 324 337 4 631 655 3 Operating Profit $ 139 $ 140 (1) $ 258 $ 254 1 Company sales 100.0 % 100.0 % 100.0 % 100.0 % Food and paper 25.9 27.8 1.9 ppts. 25.7 28.0 2.3 ppts. Payroll and employee benefits 28.4 27.4 (1.0 ppts.) 29.1 28.2 (0.9 ppts.) Occupancy and other operating expenses 23.4 21.9 (1.5 ppts.) 23.6 22.5 (1.1 ppts.) Restaurant margin 22.3 % 22.9 % (0.6 ppts.) 21.6 % 21.3 % 0.3 ppts. Operating margin 29.9 % 29.3 % 0.6 ppts. 29.0 % 28.0 % 1.0 ppts.

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc. Condensed Consolidated Balance Sheets (amounts in millions) (unaudited) 6/11/16 12/26/15 ASSETS Current Assets Cash and cash equivalents $ 795 $ 737 Accounts and notes receivable, less allowance: $18 in 2016 and $16 in 2015 395 377 Inventories 255 229 Prepaid expenses and other current assets 332 241 Advertising cooperative assets, restricted 102 103 Total Current Assets 1,879 1,687 Property, plant and equipment, net of accumulated depreciation and amortization of $3,699 in 2016 and $3,643 in 2015 4,096 4,189 Goodwill 649 656 Intangible assets, net 264 271 Investments in unconsolidated affiliates 46 61 Other assets 528 521 Deferred income taxes 722 676 Total Assets $ 8,184 $ 8,061 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable and other current liabilities $ 2,016 $ 1,985 Income taxes payable 122 77 Short-term borrowings 39 922 Advertising cooperative liabilities 102 103 Total Current Liabilities 2,279 3,087 Long-term debt 5,324 3,041 Other liabilities and deferred credits 912 958 Total Liabilities 8,515 7,086 Redeemable noncontrolling interest — 6 Shareholders' Equity (Deficit) Common stock, no par value, 750 shares authorized; 399 shares and 420 shares issued in 2016 and 2015, respectively — — Retained earnings (deficit) (123 ) 1,150 Accumulated other comprehensive income (loss) (266 ) (239 ) Total Shareholders' Equity (Deficit) - YUM! Brands, Inc. (389 ) 911 Noncontrolling interests 58 58 Total Shareholders' Equity (Deficit) (331 ) 969 Total Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity (Deficit) $ 8,184 $ 8,061

See accompanying notes.

YUM! Brands, Inc. Condensed Consolidated Statements of Cash Flows (amounts in millions) (unaudited) Year to date 6/11/16 6/13/15 Cash Flows - Operating Activities Net income - including noncontrolling interests $ 730 $ 597 Depreciation and amortization 314 326 Closures and impairment (income) expenses 40 27 Refranchising (gain) loss (60 ) 58 Contributions to defined benefit pension plans (3 ) (78 ) Deferred income taxes (43 ) (77 ) Equity income from investments in unconsolidated affiliates (26 ) (16 ) Distributions of income received from unconsolidated affiliates 13 4 Excess tax benefit from share-based compensation (26 ) (40 ) Share-based compensation expense 27 28 Changes in accounts and notes receivable 32 16 Changes in inventories (29 ) 21 Changes in prepaid expenses and other current assets 3 (27 ) Changes in accounts payable and other current liabilities (44 ) 17 Changes in income taxes payable 84 91 Changes in restricted cash (81 ) (6 ) Other, net (35 ) 6 Net Cash Provided by Operating Activities 896 947 Cash Flows - Investing Activities Capital spending (343 ) (404 ) Changes in short-term investments, net (51 ) (16 ) Proceeds from refranchising of restaurants 98 29 Other, net 8 39 Net Cash Used in Investing Activities (288 ) (352 ) Cash Flows - Financing Activities Proceeds from long-term debt 2,300 — Repayments of long-term debt (304 ) (7 ) Short-term borrowings by original maturity More than three months - proceeds 1,400 — More than three months - payments (2,000 ) — Three months or less, net — — Revolving credit facilities, three months or less, net 37 65 Repurchase shares of Common Stock (1,559 ) (287 ) Excess tax benefit from share-based compensation 26 40 Employee stock option proceeds 2 11 Dividends paid on Common Stock (379 ) (355 ) Other, net (61 ) (43 ) Net Cash Used in Financing Activities (538 ) (576 ) Effect of Exchange Rate on Cash and Cash Equivalents (12 ) 39 Net Increase in Cash and Cash Equivalents 58 58 Cash and Cash Equivalents - Beginning of Period 737 578 Cash and Cash Equivalents - End of Period $ 795 $ 636

See accompanying notes.

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 U.S. Generally Accepted Accounting Principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements which present earnings before Special Items and Operating profit on a basis before Special Items and foreign currency translation ("Core Operating Profit"). Included in Special Items are gains/(losses) associated with the costs associated with the planned spin-off of the China business and YUM recapitalization, costs associated with the KFC U.S. Acceleration Agreement, certain refranchising initiatives and the impact of redeeming the Little Sheep noncontrolling interest. These amounts are described in (c), (d), (e) and (f) in the accompanying notes.

The Company excludes Special Items and foreign currency translation impacts for the purposes of evaluating performance internally. Special Items are not included in any of our externally reported segment results. Additionally, we believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations, which is quantified by translating current year results at prior year average exchange rates. 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 earnings before Special Items and Core Operating Profit provide additional information to investors to facilitate the comparison of past and present operations, excluding items in the quarters and years to date ended June 11, 2016 and June 13, 2015 that the Company does not believe are indicative of our ongoing operations due to their size and/or nature.

Quarter ended Year to date 6/11/16 6/13/15 6/11/16 6/13/15 Detail of Special Items Costs associated with the planned spin-off of the China business and YUM recapitalization(c) $ (10 ) $ — $ (19 ) $ — Costs associated with KFC U.S. Acceleration Agreement(d) (8 ) (8 ) (17 ) (10 ) Refranchising initiatives(e) 53 (72 ) 56 (65 ) Other Special Items Income (Expense) (6 ) 2 (6 ) 2 Special Items Income (Expense) - Operating Profit 29 (78 ) 14 (73 ) Tax Benefit (Expense) on Special Items (13 ) 3 (9 ) 1 Special Items Income (Expense), net of tax - including noncontrolling interests 16 (75 ) 5 (72 ) Special Items Income (Expense), net of tax - noncontrolling interests(f) (8 ) — (8 ) — Special Items Income (Expense), net of tax - Yum! Brands, Inc. $ 24 $ (75 ) $ 13 $ (72 ) Average diluted shares outstanding 417 445 420 446 Special Items diluted EPS $ 0.06 $ (0.16 ) $ 0.03 $ (0.16 ) Reconciliation of Core Operating Profit to Reported Operating Profit Core Operating Profit $ 478 $ 449 $ 1,085 $ 950 Special Items Income (Expense) 29 (78 ) 14 (73 ) Foreign Currency Impact on Reported Operating Profit (16 ) N/A (44 ) N/A Reported Operating Profit $ 491 $ 371 $ 1,055 $ 877 Reconciliation of EPS Before Special Items to Reported EPS Diluted EPS Before Special Items $ 0.75 $ 0.69 $ 1.71 $ 1.50 Special Items EPS 0.06 (0.16 ) 0.03 (0.16 ) Reported EPS $ 0.81 $ 0.53 $ 1.74 $ 1.34 Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate Effective Tax Rate Before Special Items 24.6 % 25.6 % 24.8 % 24.4 % Impact on Tax Rate as a result of Special Items 1.2 % 4.8 % 0.6 % 1.9 % Reported Effective Tax Rate 25.8 % 30.4 % 25.4 % 26.3 %

YUM! Brands, Inc. Segment Results (amounts in millions) (unaudited) Quarter Ended 6/11/16 China KFC Pizza

Hut Taco

Bell Corporate

and

Unallocated Consolidated Total revenues $ 1,588 $ 712 $ 246 $ 463 $ (1 ) $ 3,008 Company restaurant expenses 1,315 443 114 274 — 2,146 General and administrative expenses 102 94 56 45 68 365 Franchise and license expenses 5 23 10 5 7 50 Closures and impairment (income) expenses 31 3 2 1 — 37 Refranchising (gain) loss — — — — (53 ) (53 ) Other (income) expense (12 ) — — (1 ) (15 ) (28 ) 1,441 563 182 324 7 2,517 Operating Profit (loss) $ 147 $ 149 $ 64 $ 139 $ (8 ) $ 491 Quarter Ended 6/13/15 China KFC Pizza

Hut Taco

Bell Corporate

and

Unallocated Consolidated Total revenues $ 1,636 $ 726 $ 266 $ 477 $ — $ 3,105 Company restaurant expenses 1,374 457 131 286 — 2,248 General and administrative expenses 100 97 63 47 46 353 Franchise and license expenses 5 21 9 4 8 47 Closures and impairment (income) expenses 17 3 3 1 — 24 Refranchising (gain) loss — — — — 68 68 Other (income) expense (4 ) (1 ) — (1 ) — (6 ) 1,492 577 206 337 122 2,734 Operating Profit (loss) $ 144 $ 149 $ 60 $ 140 $ (122 ) $ 371

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.

YUM! Brands, Inc. Segment Results (amounts in millions) (unaudited) Year to Date 6/11/16 China KFC Pizza

Hut Taco

Bell Corporate

and

Unallocated Consolidated Total revenues $ 2,891 $ 1,337 $ 511 $ 889 $ (1 ) $ 5,627 Company restaurant expenses 2,307 809 231 531 — 3,878 General and administrative expenses 168 170 106 91 116 651 Franchise and license expenses 9 44 20 9 16 98 Closures and impairment (income) expenses 31 5 3 1 — 40 Refranchising (gain) loss — — — — (60 ) (60 ) Other (income) expense (27 ) — — (1 ) (7 ) (35 ) 2,488 1,028 360 631 65 4,572 Operating Profit (loss) $ 403 $ 309 $ 151 $ 258 $ (66 ) $ 1,055 Year to Date 6/13/15 China KFC Pizza

Hut Taco

Bell Corporate

and

Unallocated Consolidated Total revenues $ 2,892 $ 1,388 $ 538 $ 909 $ — $ 5,727 Company restaurant expenses 2,376 854 258 557 — 4,045 General and administrative expenses 168 179 120 91 90 648 Franchise and license expenses 9 38 18 6 10 81 Closures and impairment (income) expenses 19 3 3 2 — 27 Refranchising (gain) loss — — — — 58 58 Other (income) expense (14 ) (1 ) (2 ) (1 ) 9 (9 ) 2,558 1,073 397 655 167 4,850 Operating Profit (loss) $ 334 $ 315 $ 141 $ 254 $ (167 ) $ 877