CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

In Millions

Sep. 04, 2010

Dec. 26, 2009

Current Assets

Cash and cash equivalents

$ 1,274

$ 353

Accounts and notes receivable, net

249

239

Inventories

149

122

Prepaid expenses and other current assets

313

314

Deferred income taxes

81

Advertising cooperative assets, restricted

109

99

Total Current Assets

2,175

1,208

Property, plant and equipment, net

3,770

3,899

Goodwill

700

640

Intangible assets, net

440

462

Investments in unconsolidated affiliates

145

144

Other assets

529

544

Deferred income taxes

329

251

Total Assets

8,088

7,148

Current Liabilities

Accounts payable and other current liabilities

1,374

1,413

Income taxes payable

94

82

Short-term borrowings

724

59

Advertising cooperative liabilities

109

99

Total Current Liabilities

2,301

1,653

Long-term debt

2,905

3,207

Other liabilities and deferred credits

1,239

1,174

Total Liabilities

6,445

6,034

Shareholders' Equity

Common stock, no par value, 750 shares authorized; 468 shares and 469 shares issued in 2010 and 2009, respectively

112

253

Retained earnings

1,681

996

Accumulated other comprehensive income (loss)

(237)

(224)

Total Shareholders' Equity - YUM! Brands, Inc.

1,556

1,025

Noncontrolling interest

87

89

Total Shareholders' Equity

1,643

1,114

Total Liabilities and Shareholders' Equity

$ 8,088

$ 7,148

PARENTHETICAL DATA FOR CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

In Millions, except Per Share data

Sep. 04, 2010

Dec. 26, 2009

Shareholders' Equity (Deficit)

Common Stock, no par value

$ 0

Common Stock, shares authorized

750

Common Stock, shares issued

468

469

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)

In Millions, except Per Share data

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Revenues

Company sales

$ 2,496

$ 2,432

$ 6,712

$ 6,502

Franchise and license fees and income

366

346

1,069

969

Total revenues

2,862

2,778

7,781

7,471

Company restaurants

Food and paper

788

777

2,112

2,081

Payroll and employee benefits

516

523

1,480

1,485

Occupancy and other operating expenses

713

707

1,935

1,879

Company restaurant expenses

2,017

2,007

5,527

5,445

General and administrative expenses

285

276

813

812

Franchise and license expenses

24

29

71

74

Closures and impairment (income) expenses

5

21

31

Refranchising (gain) loss

(2)¹

4

51

(9)

Other (income) expense

(11)

(13)

(31)

(97)

Total costs and expenses, net

2,318

2,308

6,452

6,256

Operating Profit

544

470

1,329

1,215

Interest expense, net

38

42

121

138

Income before income taxes

506

428

1,208

1,077

Income tax provision

139

88

307

212

Net Income - including noncontrolling interest

367

340

901

865

Net Income - noncontrolling interest

10

6

17

10

Net Income - YUM! Brands, Inc.

357

334

884

855

Basic Earnings Per Common Share

0.76

0.71

1.87

1.82

Diluted Earnings Per Common Share

0.74

0.69

1.82

1.77

Dividends Declared Per Common Share

$ 0

$ 0.42

$ 0.38

[1] Refranchising (gain) loss is not allocated to segments for performance reporting purposes.

[2] During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[3] U.S. refranchising loss for the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S. During the quarter ended March 20, 2010 we offered to refranchise a substantial portion of our Company operated KFCs in the U.S. While we did not yet believe this restaurant group met the criteria to be classified as held for sale, we did, consistent with our historical policy, review the restaurant group for impairment as a result of our offer to refranchise. We determined that the carrying value of the restaurant group was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this restaurant group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a franchisee for the restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC-U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant group to date and resulted in a non-cash write down of the restaurants carrying value totaling $73 million. No further impairment was recorded in the quarters ended June 12, 2010 or September 4, 2010 as we believed the carrying value of the restaurant group, adjusted for the write down described in the previous sentence, is recoverable. We continued to depreciate the pre-impairment charge carrying value of these restaurants through the quarter ended March 20, 2010 and continued to depreciate the post-impairment charge carrying value thereafter. We will continue to depreciate the post-impairment charge carrying value going forward until the date we believe the held for sale criteria for any restaurants are met. Additionally, we will continue to review the restaurant group, or any subset of the restaurant group if we believe we will refranchise as a subset, for any further necessary impairment. The $73 million write down does not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write down would be recorded, consistent with our historical policy, if the restaurant group, or any subset of the restaurant group, ultimately meets the criteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)

In Millions

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Cash Flows - Operating Activities

Net Income - including noncontrolling interest

$ 901

$ 865

Depreciation and amortization

383

385

Closures and impairment (income) expenses

21

31

Refranchising (gain) loss

51

(9)

Contributions to defined benefit pension plans

(22)

(96)

Gain upon consolidation of a former unconsolidated affiliate in China

0

(68)⁴

Deferred income taxes

(130)

59

Equity income from investments in unconsolidated affiliates

(34)

(29)

Distributions of income received from unconsolidated affiliates

34

29

Excess tax benefits from share-based compensation

(46)

(48)

Share-based compensation expense

37

39

Changes in accounts and notes receivable

(6)

11

Changes in inventories

(30)

34

Changes in prepaid expenses and other current assets

15

(26)

Changes in accounts payable and other current liabilities

94

2

Changes in income taxes payable

118

(87)

Other, net

111

43

Net Cash Provided by Operating Activities

1,497

1,135

Cash Flows - Investing Activities

Capital spending

(490)

(505)

Proceeds from refranchising of restaurants

106

91

Acquisitions and investments

(62)

(99)

Sales of property, plant and equipment

21

16

Other, net

(10)

(8)

Net Cash Used in Investing Activities

(435)

(505)

Cash Flows - Financing Activities

Proceeds from long-term debt

350

499

Repayments of long-term debt

(20)

(522)

Revolving credit facilities, three months or less, net

12

(289)

Short-term borrowings by original maturity

More than three months - proceeds

0

More than three months - payments

0

Three months or less, net

5

Repurchase shares of Common Stock

(283)

0

Excess tax benefits from share-based compensation

46

48

Employee stock option proceeds

64

91

Dividends paid on Common Stock

(295)

(263)

Other, net

(30)

(8)

Net Cash Used in Financing Activities

(151)

(439)

Effect of Exchange Rates on Cash and Cash Equivalents

10

0

Net Increase in Cash and Cash Equivalents

921

191

Change in Cash and Cash Equivalents due to consolidation of an entity in China

0

17

Cash and Cash Equivalents - Beginning of Period

353

216

Cash and Cash Equivalents - End of Period

$ 1,274

$ 424

[1] During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[2] Refranchising (gain) loss is not allocated to segments for performance reporting purposes.

[3] U.S. refranchising loss for the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S. During the quarter ended March 20, 2010 we offered to refranchise a substantial portion of our Company operated KFCs in the U.S. While we did not yet believe this restaurant group met the criteria to be classified as held for sale, we did, consistent with our historical policy, review the restaurant group for impairment as a result of our offer to refranchise. We determined that the carrying value of the restaurant group was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this restaurant group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a franchisee for the restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC-U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant group to date and resulted in a non-cash write down of the restaurants carrying value totaling $73 million. No further impairment was recorded in the quarters ended June 12, 2010 or September 4, 2010 as we believed the carrying value of the restaurant group, adjusted for the write down described in the previous sentence, is recoverable. We continued to depreciate the pre-impairment charge carrying value of these restaurants through the quarter ended March 20, 2010 and continued to depreciate the post-impairment charge carrying value thereafter. We will continue to depreciate the post-impairment charge carrying value going forward until the date we believe the held for sale criteria for any restaurants are met. Additionally, we will continue to review the restaurant group, or any subset of the restaurant group if we believe we will refranchise as a subset, for any further necessary impairment. The $73 million write down does not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write down would be recorded, consistent with our historical policy, if the restaurant group, or any subset of the restaurant group, ultimately meets the criteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

[4] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in China.

Financial Statement Presentation

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 (“GAAP”) in the United States (“U.S.”) for complete financial statements. Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the fiscal year ended December 26, 2009 (“2009 Form 10-K”). Except as disclosed herein, there has been no material change in the information disclosed in the Notes to our Consolidated Financial Statements included in the 2009 Form 10-K.

YUM! Brands, Inc. and Subsidiaries (collectively referred to as “YUM” or the “Company”) comprise the worldwide operations of KFC, Pizza Hut, Taco Bell, Long John Silver’s (“LJS”) and A&W All-American Food Restaurants (“A&W”) (collectively the “Concepts”). References to YUM throughout these Notes to our Financial Statements are made using the first person notations of “we,” “us” or “our.”

YUM’s business consists of three reporting segments: YUM Restaurants China (“China Division”), YUM Restaurants International (“YRI” or “International Division”) and United States. The China Division includes mainland China (“China”) and YRI includes the remainder of our international operations.

At the beginning of 2010 we began reporting information for our Thailand and KFC Taiwan businesses within our International Division as a result of changes to our management reporting structure. These businesses now report to the President of YRI, whereas previously they reported to the President of the China Division. While this reporting change did not impact our consolidated results, segment information for previous periods has been restated to be consistent with the current period presentation throughout the Financial Statements and Notes thereto. For the quarter and year to date ended September 5, 2009 this restatement resulted in a decrease in Company sales of $68 million and $179 million, respectively, for the China Division. For the quarter and year to date ended September 5, 2009, this restatement resulted in a decrease to operating profit of $1 million and $4 million, respectively, for the China Division. Any impact of the restatement on the China Division reported figures was offset by the impact to the International Division reported figures.

Our fiscal year ends on the last Saturday in December and, as a result, a 53rd week is added every five or six years. 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 subsidiaries operate on similar fiscal calendars except that certain international subsidiaries operate on a monthly calendar, with two months in the first quarter, three months in the second and third quarters and four months in the fourth quarter. All of our international businesses except China close one period or one month earlier to facilitate consolidated reporting.

As discussed in Note 4, in the quarter ended June 13, 2009 we began consolidating the entity that operates the KFCs in Shanghai, China. The increase in cash related to the consolidation of this entity’s cash balance ($17 million) is presented as a single line item on our Condensed Consolidated Statement of Cash Flows.

Our preparation of the accompanying Financial Statements in conformity with U.S. 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 the estimates.

In our opinion, the accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2009 Form 10-K, our financial position as of September 4, 2010, and the results of our operations for the quarters and years to date ended September 4, 2010 and September 5, 2009 and cash flows for the years to date ended September 4, 2010 and September 5, 2009. Our results of operations and cash flows for these interim periods are not necessarily indicative of the results to be expected for the full year.

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

Earnings Per Common Share ("EPS")

Earnings Per Common Share (EPS)

Note 2 - Earnings Per Common Share (“EPS”)

	Quarter ended				Year to date
	9/4/10		9/5/09		9/4/10		9/5/09
Net Income – YUM! Brands, Inc.	$	357	$	334	$	884	$	855

Weighted-average common shares outstanding (for basic calculation)		473		472		473		469
Effect of dilutive share-based employee compensation		11		13		12		13
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)		484		485		485		482
Basic EPS	$	0.76	$	0.71	$	1.87	$	1.82
Diluted EPS	$	0.74	$	0.69	$	1.82	$	1.77
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)		0.2		12.3		3.2		13.8

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

Shareholders' Equity

Note 3 - Shareholders' Equity

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the year to date ended September 4, 2010, as indicated below. All amounts exclude applicable transaction fees. We had no share repurchases in the year to date ended September 5, 2009.

		Shares Repurchased (thousands)		Dollar Value of Shares Repurchased			Remaining Dollar Value of Shares that may be Repurchased
Authorization Date	Authorization Expiration Date		2010		2010				2010
September 2009	September 2010		7,598		$	283		$	17
March 2010	March 2011		-			-			300
Total			7,598		$	283		$	317

Comprehensive income was as follows:

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Net Income - YUM! Brands, Inc.	$	357		$	334		$	884		$	855
Foreign currency translation adjustment		20			61			(27	)		126
Changes in fair value of derivatives, net of tax		(6	)		(16	)		23			(14	)
Reclassification of derivative (gains) losses to Net Income, net of tax		8			13			(22	)		19
Reclassification of pension actuarial losses to Net Income, net of tax		4			3			13			8
Total comprehensive income	$	383		$	395		$	871		$	994

A reconciliation of the beginning and ending carrying amount of the equity attributable to noncontrolling interests is as follows:

Noncontrolling interest as of December 26, 2009	$	89
Net Income - noncontrolling interest		17
Dividends declared		(19	)
Noncontrolling interest as of September 4, 2010	$	87

Items Affecting Comparability of Net Income and Cash Flows

Note 4 - Items Affecting Comparability of Net Income and Cash Flows

U.S. Business Transformation

As part of our plan to transform our U.S. business we took several measures in 2010 and 2009 ("the U.S. business transformation measures"). These measures include: expansion of our U.S. refranchising; charges relating to General and Administrative ("G&A") productivity initiatives and realignment of resources (primarily severance and early retirement costs); and investments in our U.S. Brands made on behalf of our franchisees such as equipment purchases.

In the year to date ended September 4, 2010, we recorded a pre-tax refranchising loss of $51 million in the U.S. The loss recorded in the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S., principally a substantial portion of our Company operated KFC restaurants in the quarter ended March 20, 2010. See the Facility Actions section for further detail. In the quarter and year to date ended September 5, 2009, we recorded pre-tax gains of $8 million and $23 million, respectively, from refranchising in the U.S.

In connection with our G&A productivity initiatives and realignment of resources we recorded pre-tax charges of $5 million and $9 million in the years to date ended September 4, 2010 and September 5, 2009, respectively. The unpaid current liability for the severance portion of these charges was $1 million as of September 4, 2010. Severance payments in the quarter and year to date ended September 4, 2010 totaled approximately $1 million and $5 million, respectively.

Additionally, the Company recognized a reduction to Franchise and license fees and income of $1 million and $32 million in the quarter and year to date ended September 5, 2009, respectively, related to investments in our U.S. Brands. These investments reflect our reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken. The reimbursements were recorded as a reduction to Franchise and license fees and income as we would not have provided the reimbursements absent the ongoing franchise relationship.

We are not including the impacts of these U.S. business transformation measures in our U.S. segment for performance reporting purposes as we do not believe they are indicative of our ongoing operations. Additionally , we are not including the depreciation reduction of $2 million and $5 million for the quarter and year to date ended September 4, 2010, respectively, arising from the impairment of the KFCs offered for sale in the quarter ended March 20, 2010 within our U.S. segment for performance reporting purposes. Rather, we are recording such reduction as a credit within unallocated Occupancy and other operating expenses resulting in depreciation expense for these restaurants continuing to be recorded in the U.S. segment at the rate at which it was prior to the impairment charge being recorded.

Russia Acquisition

On July 1, 2010, we completed the exercise of our option with our Russian partner to purchase their interest in the co-branded KFC-Rostik's restaurants across Russia and the Commonwealth of Independent States ("CIS"). As a result, we acquired company ownership of 50 restaurants and gained full rights and responsibilities as franchisor of 81 restaurants, which our partner previously managed as master franchisor. Upon exercise of our option, we paid cash of $56 million, net of settlement of a long-term note receivable of $11 million, and assumed long-term debt of $10 million. The remaining balance of the purchase price, anticipated to be $11 million, will be paid in cash in July 2012. The impact of consolidating this business on all line items within our Condensed Consolidated Income Statement was insignificant for the quarter ended September 4, 2010 for our International Division. While we have not yet completed our allocation of the purchase price, our Condensed Consolidated Balance Sheet at September 4, 2010 reflects the consolidation of this entity using preliminary amounts including $74 million of goodwill. We anticipate that the preliminary amount allocated to the International Division's goodwill will be retroactively reduced upon completion of the determination of all identifiable assets acquired and liabilities assumed.

The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2010 or 2009 would not have been significant.

Consolidation of a Former Unconsolidated Affiliate in China

On May 4, 2009 we acquired an additional 7% ownership in the entity that operates more than 200 KFCs in Shanghai, China for $12 million, increasing our ownership to 58%. The acquisition was driven by our desire to increase our management control over the entity and further integrate the business with the remainder of our KFC operations in China. Prior to our acquisition of this additional interest this entity was accounted for as an unconsolidated affiliate under the equity method of accounting due to the effective participation of our partners in the significant decisions of the entity that were made in the ordinary course of business. Concurrent with the acquisition we received additional rights in the governance of the entity, and thus we began consolidating the entity upon acquisition. As required by GAAP, we remeasured our previously held 51% ownership in the entity, which had a recorded value of $17 million at the date of acquisition, at fair value and recognized a gain of $68 million accordingly. This gain, which resulted in no related income tax expense, was recorded in Other (income) expense on our Condensed Consolidated Statements of Income during the quarter ended June 13, 2009 and was not allocated to any segment for performance reporting purposes.

Under the equity method of accounting, we previously reported our 51% share of the net income of the unconsolidated affiliate (after interest expense and income taxes) as Other (income) expense in the Condensed Consolidated Statements of Income. We also recorded a franchise fee for the royalty received from the stores owned by the unconsolidated affiliate. From the date of the acquisition we have reported the results of operations for the entity in the appropriate line items of our Condensed Consolidated Statements of Income. We no longer recorded franchise fee income for these restaurants nor did we report Other (income) expense as we did under the equity method of accounting. Net income attributable to our partner's ownership percentage is recorded in Net Income - noncontrolling interest. For the year to date ended September 4, 2010 the consolidation of the existing restaurants upon acquisition increased Company sales by $98 million and decreased Franchise and license fees and income by $6 million. For the year to date ended September 4, 2010, the consolidation of the existing restaurants upon acquisition increased Operating Profit by $3 million. The impact on Net Income - YUM! Brands, Inc. was not significant to the year to date ended September 4, 2010. As the existing restaurants were consolidated for all of both the quarters ended September 4, 2010 and September 5, 2009, the consolidation of these restaurants did not impact comparability for the quarter.

The pro forma impact on our results of operations if the acquisition had been completed as of the beginning of 2009 would not have been significant.

Issuance of Senior Unsecured Notes

On August 24, 2010, we issued $350 million aggregate principal amount of 3.875% Senior Unsecured Notes that are due on November 1, 2020 (the "2010 Notes"). We will use the net proceeds for general corporate purposes, which may include repayment of indebtedness. Pending the use of the net proceeds for these purposes, we have temporarily invested all or a portion of the net proceeds in short-term, investment grade securities, which are classified as Cash and Cash Equivalents on our Condensed Consolidated Balance Sheet at September 4, 2010.

On August 20, 2009, we issued $250 million aggregate principal amount of 4.25% Senior Unsecured Notes that are due on September 15, 2015 and $250 million aggregate principal amount of 5.30% Senior Unsecured Notes that are due on September 15, 2019.

Facility Actions

Refranchising (gain) loss, Store closure (income) costs and Store impairment charges by reportable segment are as follows:

	Quarter ended September 4, 2010
	China Division			YRI			U.S.		Worldwide
Refranchising (gain) loss(a)	$	(1	)	$	(1	)	$	-	$	(2	)

Store closure (income) costs(b)	$	(1	)	$	1		$	1	$	1
Store impairment charges		1			2			1		4
Closure and impairment (income) expenses	$	-		$	3		$	2	$	5

	Quarter ended September 5, 2009
	China Division		YRI			U.S.			Worldwide
Refranchising (gain) loss(a) (c)	$	-	$	12		$	(8	)	$	4

Store closure (income) costs(b)	$	-	$	(1	)	$	-		$	(1	)
Store impairment charges		2		-			4			6
Closure and impairment (income) expenses	$	2	$	(1	)	$	4		$	5

	Year to date ended September 4, 2010
	China Division			YRI		U.S.		Worldwide
Refranchising (gain) loss(a)(c)(d)	$	(5	)	$	5	$	51	$	51

Store closure (income) costs(b)	$	(1	)	$	-	$	2	$	1
Store impairment charges		6			6		8		20
Closure and impairment (income) expenses	$	5		$	6	$	10	$	21

	Year to date ended September 5, 2009
	China Division		YRI		U.S.			Worldwide
Refranchising (gain) loss(a) (c)	$	-	$	14	$	(23	)	$	(9	)

Store closure (income) costs(b)	$	-	$	-	$	3		$	3
Store impairment charges		6		5		17			28
Closure and impairment (income) expenses	$	6	$	5	$	20		$	31

(a)	Refranchising (gain) loss is not allocated to segments for performance reporting purposes.

(b)	Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.

(c)	During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

(d)

U.S. refranchising loss for the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S. During the quarter ended March 20, 2010 we offered to refranchise a substantial portion of our Company operated KFCs in the U.S. While we did not yet believe this restaurant group met the criteria to be classified as held for sale, we did, consistent with our historical policy, review the restaurant group for impairment as a result of our offer to refranchise. We determined that the carrying value of the restaurant group was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this restaurant group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a franchisee for the restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC-U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant group to date and resulted in a non-cash write down of the restaurants' carrying value totaling $73 million. No further impairment was recorded in the quarters ended June 12, 2010 or September 4, 2010 as we believed the carrying value of the restaurant group, adjusted for the write down described in the previous sentence, is recoverable. We continued to depreciate the pre-impairment charge carrying value of these restaurants through the quarter ended March 20, 2010 and continued to depreciate the post-impairment charge carrying value thereafter. We will continue to depreciate the post-impairment charge carrying value going forward until the date we believe the held for sale criteria for any restaurants are met. Additionally, we will continue to review the restaurant group, or any subset of the restaurant group if we believe we will refranchise as a subset, for any further necessary impairment. The $73 million write down does not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write down would be recorded, consistent with our historical policy, if the restaurant group, or any subset of the restaurant group, ultimately meets the criteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

Assets held for sale at September 4, 2010 and December 26, 2009 total $23 million and $32 million, respectively, of U.S. property, plant and equipment and are included in Prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets.

Recently Adopted Accounting Pronouncements

Note 5 - Recently Adopted Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board ("FASB") issued new guidance and clarifications for improving disclosures about fair value measurements. This guidance requires enhanced disclosures regarding transfers in and out of the levels within the fair value hierarchy. Separate disclosures are required for transfers in and out of Level 1 and 2 fair value measurements, and the reasons for the transfers must be disclosed. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009.

In June 2009, the FASB issued guidance on transfers and servicing of financial assets, requiring more information about transfers of financial assets, eliminating the qualifying special purpose entity concept, changing the requirements for derecognizing financial assets and requiring additional disclosures. The FASB also issued guidance for determining whether an entity is a variable interest entity, that modifies the methods allowed for determining the primary beneficiary of a variable interest entity, that requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and that requires enhanced disclosures related to an enterprise's involvement in a variable interest entity. The adoption of this guidance did not impact the Company's Condensed Consolidated Financial Statements for the quarter or year to date ended September 4, 2010. See Note 13 for additional information on an entity that operates a lending program on behalf of the Company's franchisees.

Other (Income) Expense

Note 6 - Other (Income) Expense

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Equity income from investments in unconsolidated affiliates	$	(14	)	$	(12	)	$	(34	)	$	(29	)
Gain upon consolidation of former unconsolidated affiliate in China(a)		-			-			-			(68	)
Foreign exchange net (gain) loss and other		3			(1	)		3			-
Other (income) expense	$	(11	)	$	(13	)	$	(31	)	$	(97	)

(a)	See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in China.

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information - Accounts and Notes Receivable

Note 7A - Supplemental Balance Sheet Information

	9/4/10			12/26/09
Accounts and notes receivable	$	283		$	274
Allowance for doubtful accounts		(34	)		(35	)
Accounts and notes receivable, net	$	249		$	239

Accounts and notes receivable consist primarily of amounts due from franchisees and licensees, including initial and continuing fees. The financial condition of these franchisees and licensees is largely dependent upon the underlying business trends of our concepts. This concentration of credit risk is mitigated, in part, by the large number of franchisees and licensees of each concept and the short-term nature of the franchisee and licensee fee receivables.

Supplemental Balance Sheet Information - Property, Plant and Equipment

Note 7B - Supplemental Balance Sheet Information

	9/4/10			12/26/09
Property, plant and equipment, gross	$	7,230		$	7,247
Accumulated depreciation and amortization		(3,460	)		(3,348	)
Property, plant and equipment, net	$	3,770		$	3,899

Income Taxes

Note 8 - Income Taxes

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Income taxes	$	139		$	88		$	307		$	212
Effective tax rate		27.5	%		20.6	%		25.4	%		19.7	%

Our third quarter and year to date 2010 and 2009 effective tax rates were lower than the expected U.S. federal statutory rate of 35% primarily due to the majority of our income being earned outside of the U.S. where tax rates are generally lower than the U.S. rate.

Our third quarter 2010 rate was higher than the prior year primarily due to lapping certain items from 2009. These items include adjustments to reserves and prior years, including prior year foreign tax credit balances, and the reversal of foreign valuation allowances associated with certain deferred tax assets that we believe are more likely than not to be utilized on future tax returns.

Year to date, our effective tax rate was higher than the prior year due to lapping 2009 items, as described above, as well as lapping a one-time gain, with no related income tax expense, recognized on our acquisition of additional interest in, and consolidation of, the entity that operates the KFCs in Shanghai, China. This was partially offset by the current favorable impact of foreign and U.S. tax effects attributable to ongoing foreign operations, including a foreign law change.

On June 23, 2010, the Company received a Revenue Agent Report ("RAR") from the Internal Revenue Service (the "IRS") relating to its examination of our U.S. federal income tax returns for fiscal years 2004 through 2006. The IRS has proposed an adjustment to increase the taxable value of rights to intangibles used outside the U.S. that Yum transferred to certain of its foreign subsidiaries. The proposed adjustment would result in additional taxable gain of approximately $2 billion for these years and approximately $700 million of additional taxes plus net interest to date of approximately $145 million. Furthermore, if the IRS prevails it is likely to make similar claims for years subsequent to fiscal 2006. The potential additional taxes for these later years, through 2009, computed on a similar basis to the 2004-2006 additional taxes, would be approximately $280 million plus net interest to date of approximately $15 million.

We believe that the Company has properly reported taxable income and paid taxes in accordance with applicable laws and that the proposed adjustment is inconsistent with applicable income tax laws, Treasury Regulations and relevant case law. We intend to defend our position vigorously and have filed a protest with the IRS. As the final resolution of the proposed adjustment remains uncertain, the Company will continue to provide for its position in this matter based on the tax benefit that we believe is the largest amount that is more likely than not to be realized upon settlement of this issue. There can be no assurance that payments due upon final resolution of this issue will not exceed our currently recorded reserve and such payments could have a material adverse effect on our financial position. Additionally, if increases to our reserves are deemed necessary due to future developments related to this issue, such increases could have a material, adverse effect on our results of operations as they are recorded. The Company does not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution.

Reportable Operating Segments

Note 9 - Reportable Operating Segments

We identify our operating segments based on management responsibility. The China Division includes mainland China and YRI includes the remainder of our international operations. See Note 1 regarding a 2010 change in segments impacting the China Division and YRI. In the U.S., we consider LJS and A&W to be a single operating segment. We consider our KFC-U.S., Pizza Hut-U.S., Taco Bell-U.S. and LJS/A&W-U.S. operating segments to be similar and therefore have aggregated them into a single reportable operating segment.

The following tables summarize revenue and operating profit for each of our reportable operating segments:

	Quarter ended					Year to date
Revenues	9/4/10		9/5/09			9/4/10		9/5/09
China Division	$	1,188	$	994		$	2,783	$	2,291
YRI(a)		704		730			2,101		2,012
U.S.		970		1,055			2,897		3,200
Unallocated Franchise and license fees and income(b)(c)		-		(1	)		-		(32	)
	$	2,862	$	2,778		$	7,781	$	7,471

	Quarter ended						Year to date
Operating Profit	9/4/10			9/5/09			9/4/10			9/5/09
China Division (d)	$	267		$	216		$	582		$	449
YRI		142			120			405			346
United States		168			171			495			497
Unallocated Franchise and license fees and income(b)(c)		-			(1	)		-			(32	)
Unallocated Occupancy and other(c)		2			-			5			-
Unallocated and corporate expenses(c)		(36	)		(33	)		(106	)		(122	)
Unallocated Other income (expense)(c)(e)		(1	)		1			(1	)		68
Unallocated Refranchising gain (loss)(c)		2			(4	)		(51	)		9
Operating Profit		544			470			1,329			1,215
Interest expense, net		(38	)		(42	)		(121	)		(138	)
Income Before Income Taxes	$	506		$	428		$	1,208		$	1,077

(a)	Includes revenues of $238 million and $268 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $742 million and $737 million for the years to date ended September 4, 2010 and September 5, 2009, respectively, for entities in the United Kingdom.

(b)	Amount consists of reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken (See Note 4).

(c)	Amounts have not been allocated to the China Division, YRI or U.S. segments for performance reporting purposes.

(d)	Includes equity income from investments in unconsolidated affiliates of $14 million and $12 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $34 million and $29 million for the years to date ended September 4, 2010 and September 5, 2009, respectively.

(e)	The year to date ended September 5, 2009 includes a $68 million gain recognized upon our acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFCs in Shanghai, China. See Note 4 for further discussion of this transaction.

Pension Benefits

Pension and Postretirement Medical Benefits

Note 10 - Pension Benefits

We sponsor 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 while benefits from the other U.S. plan are paid by the Company as incurred. During 2001, the plans covering our U.S. salaried employees were amended such that any salaried employee hired or rehired by YUM after September 30, 2001 is not eligible to participate in those plans. We also sponsor various defined benefit pension plans covering certain of our non-U.S. employees, the most significant of which are in the United Kingdom ("U.K."). Our plans in the U.K. have previously been amended such that new employees are not eligible to participate in these plans.

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

	U.S. Pension Plans						International Pension Plans
	Quarter ended						Quarter ended
	9/4/10			9/5/09			9/4/10			9/5/09
Service cost	$	5		$	6		$	1		$	2
Interest cost		15			13			2			2
Expected return on plan assets		(16	)		(13	)		(1	)		(1	)
Amortization of net loss		5			3			-			-
Net periodic benefit cost	$	9		$	9		$	2		$	3

	U.S. Pension Plans						International Pension Plans
	Year to date						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Service cost	$	17		$	18		$	4		$	4
Interest cost		43			40			6			5
Expected return on plan assets		(48	)		(40	)		(6	)		(4	)
Amortization of net loss		16			9			1			1
Net periodic benefit cost	$	28		$	27		$	5		$	6

We made no contributions to the Plan during the year to date ended September 4, 2010. We continue to evaluate the funded status of the Plan, and we may choose to make discretionary contributions of approximately $75 million in the fourth quarter of 2010. We made contributions of $17 million to our U.K. Plans during the year to date ended September 4, 2010.

Derivative Instruments

Note 11 - Derivative Instruments

The Company is exposed to certain market risks relating to its ongoing business operations. The primary market risks managed by using derivative instruments are interest rate risk and cash flow volatility arising from foreign currency fluctuations.

We enter into interest rate swaps with the objective of reducing our exposure to interest rate risk and lowering interest expense for a portion of our fixed-rate debt. At September 4, 2010, our interest rate derivative instruments outstanding had notional amounts of $925 million and have been designated as fair value hedges of a portion of our debt. The critical terms of these swaps, including reset dates and floating rate indices match those of our underlying fixed-rate debt and no ineffectiveness has been recorded.

We enter into foreign currency forward contracts with the objective of reducing our exposure to cash flow volatility arising from foreign currency fluctuations associated with certain foreign currency denominated intercompany short-term receivables and payables. The notional amount, maturity date, and currency of these contracts match those of the underlying receivables or payables. For those foreign currency exchange forward contracts that we have designated as cash flow hedges, we measure ineffectiveness by comparing the cumulative change in the forward contract with the cumulative change in the hedged item. At September 4, 2010, foreign currency forward contracts outstanding had a total notional amount of $377 million.

The fair values of derivatives designated as hedging instruments as of September 4, 2010 and December 26, 2009 were:

		9/4/2010		12/26/09		Condensed Consolidated Balance Sheet Location
	Interest Rate Swaps - Asset	$	16	$	-	Prepaid expenses and other current assets
	Interest Rate Swaps - Asset		41		44	Other assets
	Foreign Currency Forwards - Asset		20		6	Prepaid expenses and other current assets
	Foreign Currency Forwards - Liability		(2)		(3)	Accounts payable and other current liabilities
	Total	$	75	$	47

The unrealized gains associated with our interest rate swaps that hedge the interest rate risk for a portion of our debt have been reported as an addition of $10 million and $36 million to Short-term borrowings and Long-term debt, respectively, at September 4, 2010 and as an addition of $36 million to Long-term debt at December 26, 2009. During the quarter and year to date ended September 4, 2010, Interest expense, net was reduced by $8 million and $23 million, respectively, for recognized gains on these interest rate swaps. During the quarter and year to date ended September 5, 2009, Interest expense, net was reduced by $5 million and $23 million, respectively for recognized gains on these interest rate swaps.

For our foreign currency forward contracts the following effective portions of gains and losses were recognized into Other Comprehensive Income ("OCI") and reclassified into income from OCI:

	Quarter ended				Year to date
	9/4/10		9/5/09		9/4/10		9/5/09
Gains (losses) recognized into OCI, net of tax	$	(6)	$	(16)	$	23	$	(14)
Gains (losses) reclassified from Accumulated OCI into income, net of tax	$	(8)	$	(13)	$	22	$	(19)

The gains/losses reclassified from Accumulated OCI into income were recognized as Other income (expense) in our Condensed Consolidated Statement of Income, largely offsetting foreign currency transaction losses/gains recorded when the related intercompany receivables and payables were adjusted for foreign currency fluctuations. Changes in fair values of the foreign currency forwards recognized directly in our results of operations either from ineffectiveness or exclusion from effectiveness testing were insignificant in the quarters and years to date ended September 4, 2010 and September 5, 2009.

Additionally, we had a net deferred loss of $11 million, net of tax, as of September 4, 2010 within Accumulated OCI due to treasury locks and forward starting interest rate swaps that have been cash settled, as well as outstanding foreign currency forward contracts. The majority of this loss arose from the settlement of forward starting interest rate swaps entered into prior to the issuance of our Senior Unsecured Notes due in 2037, and is being reclassed into earnings through 2037 to interest expense. In the quarters and years to date ended September 4, 2010 and September 5, 2009, an insignificant amount was reclassified from Accumulated OCI to Interest expense, net as a result of previously settled cash flow hedges.

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 carefully selected major financial institutions based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At September 4, 2010, all of the counterparties to our interest rate swaps and foreign currency forwards had investment grade ratings. To date, all counterparties have performed in accordance with their contractual obligations.

Fair Value Disclosures

Fair Value Measurements

Note 12 - Fair Value Disclosures

The following table presents the fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall. No transfers among the levels within the fair value hierarchy occurred during the year to date ended September 4, 2010.

	Fair Value
	Level		9/4/10		12/26/09
Foreign Currency Forwards, net		2	$	18	$	3
Interest Rate Swaps, net		2		57		44
Other Investments		1		13		13
Total			$	88	$	60

The fair value of the Company's foreign currency forwards and interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based upon observable inputs. The other investments include investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities that employees have chosen to invest in phantom shares of a Stock Index Fund or Bond Index Fund. The other investments are classified as trading securities and their fair value is determined based on the closing market prices of the respective mutual funds as of September 4, 2010 and December 26, 2009.

In the quarter ended September 4, 2010, we recorded impairment charges of $3 million to write-down long-lived assets of certain restaurants or groups of restaurants to their estimated fair value of which $2 million was recorded in Closure and impairment (income) expenses and the remainder was recorded in Refranchising (gain) loss. In the year to date ended September 4, 2010, we recorded impairment charges of $90 million to write-down long-lived assets of certain restaurants or groups of restaurants to their estimated fair value of which $78 million was recorded in Refranchising (gain) loss and $12 million was recorded in Closure and impairment (income) expenses. Impairment charges in Closure and impairment (income) expenses relate to the impairment of long-lived assets of individual restaurants that continue to be operated and have not been offered for refranchising and the resulting write-down to their estimated fair value. Impairment charges in Refranchising (gain) loss relate to the write-down of long-lived assets of restaurant groups being offered for refranchising to their estimated fair value. The long-lived assets of these restaurant groups, which consist of approximately 660 restaurants, were deemed impaired on a held for use basis. The fair values used in our impairment evaluations were an estimate of the sales prices we would anticipate receiving from a franchisee for the restaurant or restaurant groups.

At September 4, 2010 the carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated their fair values because of the short-term nature of these instruments. The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value. The Company's debt obligations, excluding capital leases, were estimated to have a fair value of $3.8 billion, compared to their carrying value of $3.3 billion. We estimated the fair value of debt using market quotes and calculations based on market rates.

Guarantees, Commitments and Contingencies

Contingencies

Note 13 - Guarantees, Commitments and Contingencies

Lease Guarantees

As a result of (a) assigning our interest in obligations under real estate leases as a condition to the refranchising of certain Company restaurants; (b) contributing certain Company restaurants to unconsolidated affiliates; and (c) guaranteeing certain other leases, we are frequently contingently liable on lease agreements. These leases have varying terms, the latest of which expires in 2026. As of September 4, 2010, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $500 million. The present value of these potential payments discounted at our pre-tax cost of debt at September 4, 2010 was approximately $425 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. Accordingly, the liability recorded for our probable exposure under such leases at September 4, 2010 was not material.

Franchise Loan Pool and Equipment Guarantees

We have agreed to provide financial support, if required, to a variable interest entity that operates a franchisee lending program used primarily to assist franchisees in the development of new restaurants and, to a lesser extent, in connection with the Company's historical refranchising programs. As part of this agreement, we have provided a partial guarantee of approximately $15 million and two letters of credit totaling approximately $23 million in support of the franchisee loan program at September 4, 2010. One such letter of credit could be used if we fail to meet our obligations under our guarantee. The other letter of credit could be used, in certain circumstances, to fund our participation in the funding of the franchisee loan program. The total loans outstanding under the loan pool were $64 million with an additional $16 million available for lending at September 4, 2010. We have determined that we are not required to consolidate this entity as we share the power to direct this entity's lending activity with other parties.

In addition to the guarantee described above, YUM has provided guarantees of $30 million on behalf of franchisees for several equipment financing programs related to specific initiatives, the most significant of which was the purchase of ovens by KFC franchisees for the launch of Kentucky Grilled Chicken. The total loans outstanding under these equipment financing programs were approximately $33 million at September 4, 2010.

Insurance Programs

We are self-insured for a substantial portion of our current and prior years' coverage including workers' compensation, employment practices liability, general liability, automobile liability, product liability and property losses (collectively, "property and casualty losses"). To mitigate the cost of our exposures for certain property and casualty losses, we make annual decisions to self-insure the risks of loss up to defined maximum per occurrence retentions on a line by line basis or to combine certain lines of coverage into one loss pool with a single self-insured aggregate retention. The Company then purchases insurance coverage, up to a certain limit, for losses that exceed the self-insurance per occurrence or aggregate retention. The insurers' maximum aggregate loss limits are significantly above our actuarially determined probable losses; therefore, we believe the likelihood of losses exceeding the insurers' maximum aggregate loss limits is remote. As of September 4, 2010 and December 26, 2009, we had liabilities recorded for self-insured property and casualty losses of $162 million and $173 million, respectively.

In the U.S. and in certain other countries, we are also self-insured for healthcare claims and for long-term disability claims for eligible participating employees subject to certain deductibles and limitations. We have accounted for our retained liabilities for property and casualty losses, healthcare and long-term disability claims, including reported and incurred but not reported claims, based on information provided by independent actuaries.

Due to the inherent volatility of actuarially determined property and casualty loss estimates, it is reasonably possible that we could experience changes in estimated losses which could be material to our growth in quarterly and annual Net Income. We believe that we have recorded reserves for property and casualty losses at a level which has substantially mitigated the potential negative impact of adverse developments and/or volatility.

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. We provide reserves for such claims and contingencies when payment is probable and reasonably estimable.

On November 26, 2001, Kevin Johnson, a former Long John Silver's ("LJS") restaurant manager, filed a collective action against LJS in the United States District Court for the Middle District of Tennessee alleging violation of the Fair Labor Standards Act ("FLSA") on behalf of himself and allegedly similarly-situated LJS general and assistant restaurant managers. Johnson alleged that LJS violated the FLSA by perpetrating a policy and practice of seeking monetary restitution from LJS employees, including Restaurant General Managers ("RGMs") and Assistant Restaurant General Managers ("ARGMs"), when monetary or property losses occurred due to knowing and willful violations of LJS policies that resulted in losses of company funds or property, and that LJS had thus improperly classified its RGMs and ARGMs as exempt from overtime pay under the FLSA. Johnson sought overtime pay, liquidated damages, and attorneys' fees for himself and his proposed class.

LJS moved the Tennessee district court to compel arbitration of Johnson's suit. The district court granted LJS's motion on June 7, 2004, and the United States Court of Appeals for the Sixth Circuit affirmed on July 5, 2005.

On December 19, 2003, while the arbitrability of Johnson's claims was being litigated, former LJS managers Erin Cole and Nick Kaufman, represented by Johnson's counsel, initiated arbitration with the American Arbitration Association (the "Cole Arbitration"). The Cole Claimants sought a collective arbitration on behalf of the same putative class as alleged in the Johnson lawsuit and alleged the same underlying claims.

On June 15, 2004, the arbitrator in the Cole Arbitration issued a Clause Construction Award, finding that LJS's Dispute Resolution Policy did not prohibit Claimants from proceeding on a collective or class basis. LJS moved unsuccessfully to vacate the Clause Construction Award in federal district court in South Carolina. On September 19, 2005, the arbitrator issued a Class Determination Award, finding, inter alia, that a class would be certified in the Cole Arbitration on an "opt-out" basis, rather than as an "opt-in" collective action as specified by the FLSA.

On January 20, 2006, the district court denied LJS's motion to vacate the Class Determination Award and the United States Court of Appeals for the Fourth Circuit affirmed the district court's decision on January 28, 2008. A petition for a writ of certiorari filed in the United States Supreme Court seeking a review of the Fourth Circuit's decision was denied on October 7, 2008. The parties participated in mediation on April 24, 2008, on February 28, 2009, and again on November 18, 2009 without reaching resolution. An arbitration hearing on liability with respect to the alleged restitution policy and practice for the period beginning in late 1998 through early 2002 concluded in June, 2010. On October 11, 2010, the arbitrator issued a partial interim award for the first phase of the three-phase arbitration finding that, for the period from late 1998 to early 2002, LJS had a policy and practice of making impermissible deductions from the salaries of its RGMs and ARGMs. Hearings addressing the other phases of the arbitration, including the rest of the class period and damages have not been scheduled.

Based on the rulings issued to date in this matter, the Cole Arbitration is proceeding as an "opt-out" class action, rather than as an "opt-in" collective action. LJS denies liability and is vigorously defending the claims in the Cole Arbitration. We have provided for a reasonable estimate of the cost of the Cole Arbitration, taking into account a number of factors, including our current projection of eligible claims, the estimated amount of each eligible claim, the estimated claim recovery rate, the estimated legal fees incurred by Claimants and a reasonable settlement value of Claimants' claims. However, in light of the inherent uncertainties of litigation, the fact-specific nature of Claimants' claims, and the novelty of proceeding in an FLSA lawsuit on an "opt-out" basis, there can be no assurance that the Cole Arbitration will not result in losses in excess of those currently provided for in our Condensed Consolidated Financial Statements.

On August 4, 2006, a putative class action lawsuit against Taco Bell Corp. styled Rajeev Chhibber vs. Taco Bell Corp. was filed in Orange County Superior Court. On August 7, 2006, another putative class action lawsuit styled Marina Puchalski v. Taco Bell Corp. was filed in San Diego County Superior Court. Both lawsuits were filed by a Taco Bell RGM purporting to represent all current and former RGMs who worked at corporate-owned restaurants in California since August 2002. The lawsuits allege violations of California's wage and hour laws involving unpaid overtime and meal period violations and seek unspecified amounts in damages and penalties. The cases were consolidated in San Diego County as of September 7, 2006.

Based on plaintiffs' revised class definition in their class certification motion, Taco Bell removed the case to federal court in San Diego on August 29, 2008. On March 17, 2009, the court granted plaintiffs' motion to remand. On January 29, 2010, the court granted the plaintiffs' class certification motion with respect to the unpaid overtime claims of RGMs and Market Training Managers but denied class certification on the meal period claims. The parties participated in mediation on May 26, 2010 without reaching resolution.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. We have provided for a reasonable estimate of the cost of this lawsuit. However, in view of the inherent uncertainties of litigation, there can be no assurance that this lawsuit will not result in losses in excess of those currently provided for in our Condensed Consolidated Financial Statements.

On September 10, 2007, a putative class action against Taco Bell Corp., the Company and other related entities styled Sandrika Medlock v. Taco Bell Corp., was filed in United States District Court, Eastern District, Fresno, California. The case was filed on behalf of all hourly employees who have worked at corporate-owned restaurants in California since September 2003 and alleges numerous violations of California labor laws including unpaid overtime, failure to pay wages on termination, denial of meal and rest breaks, improper wage statements, unpaid business expenses and unfair or unlawful business practices in violation of California Business & Professions Code �17200. The Company was dismissed from the case without prejudice on January 10, 2008.

On April 11, 2008, Lisa Hardiman filed a Private Attorneys General Act ("PAGA") complaint in the Superior Court of the State of California, County of Fresno against Taco Bell Corp., the Company and other related entities. This lawsuit, styled Lisa Hardiman vs. Taco Bell Corp., et al., was filed on behalf of Hardiman individually and all other aggrieved employees pursuant to PAGA. The complaint seeks penalties for alleged violations of California's Labor Code. On June 25, 2008, Hardiman filed an amended complaint adding class action allegations on behalf of hourly employees in California very similar to the Medlock case, including allegations of unpaid overtime, missed meal and rest periods, improper wage statements, non-payment of wages upon termination, unreimbursed business expenses and unfair or unlawful business practices in violation of California Business & Professions Code �17200.

On June 16, 2008, a putative class action lawsuit against Taco Bell Corp. and the Company, styled Miriam Leyva vs. Taco Bell Corp., et al., was filed in Los Angeles Superior Court. The case was filed on behalf of Leyva and purportedly all other California hourly employees and alleges failure to pay overtime, failure to provide meal and rest periods, failure to pay wages upon discharge, failure to provide itemized wage statements, unfair business practices and wrongful termination and discrimination. The Company was dismissed from the case without prejudice on August 20, 2008.

On November 5, 2008, a putative class action lawsuit against Taco Bell Corp. and the Company styled Loraine Naranjo vs. Taco Bell Corp., et al., was filed in Orange County Superior Court. The case was filed on behalf of Naranjo and purportedly all other California employees and alleges failure to pay overtime, failure to reimburse for business related expenses, improper wage statements, failure to pay accrued vacation wages, failure to pay minimum wage and unfair business practices. The Company filed a motion to dismiss on December 15, 2008, which was denied on January 20, 2009.

On March 26, 2009, Taco Bell was served with a putative class action lawsuit filed in Orange County Superior Court against Taco Bell and the Company styled Endang Widjaja vs. Taco Bell Corp., et al. The case was filed on behalf of Widjaja, a former California hourly assistant manager, and purportedly all other individuals employed in Taco Bell's California restaurants as managers and alleges failure to reimburse for business related expenses, failure to provide rest periods, unfair business practices and conversion. Taco Bell removed the case to federal district court and filed a notice of related case. On June 18, 2009 the case was transferred to the Eastern District of California.

On May 19, 2009 the court granted Taco Bell's motion to consolidate the Medlock, Hardiman, Leyva and Naranjo matters, and the consolidated case is styled In Re Taco Bell Wage and Hour Actions. On July 22, 2009, Taco Bell filed a motion to dismiss, stay or consolidate the Widjaja case with the In Re Taco Bell Wage and Hour Actions, and Taco Bell's motion to consolidate was granted on October 19, 2009.

The In Re Taco Bell Wage and Hour Actions plaintiffs filed a consolidated complaint on June 29, 2009, and on March 30, 2010 the court approved the parties' stipulation to dismiss the Company from the action. The parties participated in mediation on August 5, 2010 without reaching resolution. Motions regarding class certification are scheduled to be filed by December 30, 2010 and the hearing on any class certification motion has been scheduled for May 9, 2011.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On September 28, 2009, a putative class action styled Marisela Rosales v. Taco Bell Corp. was filed in Orange County Superior Court. The plaintiff, a former Taco Bell crew member, alleges that Taco Bell failed to timely pay her final wages upon termination, and seeks restitution and late payment penalties on behalf of herself and similarly situated employees. This case appears to be duplicative of the In Re Taco Bell Wage and Hour Actions case described above. Taco Bell removed the case to federal court on November 5, 2009, and subsequently filed a motion to dismiss, stay or transfer the case to the same district court as the In Re Taco Bell Wage and Hour Actions case. The parties stipulated to remand of the case to Orange County Superior Court on March 18, 2010. The state court granted Taco Bell's motion to stay the Rosales case on May 28, 2010, but required Taco Bell to give notice to Rosales' counsel of the In Re Taco Bell Wage and Hour Actions mediation.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On October 14, 2008, a putative class action, styled Kenny Archila v. KFC U.S. Properties, Inc., was filed in California state court on behalf of all California hourly employees alleging various California Labor Code violations, including rest and meal break violations, overtime violations, wage statement violations and waiting time penalties. KFC removed the case to the United States District Court for the Central District of California on January 7, 2009. On July 7, 2009, the Judge ruled that the case would not go forward as a class action. Plaintiff also sought recovery of civil penalties under the California Private Attorney General Act as a representative of other "aggrieved employees." On August 3, 2009, the Court ruled that the plaintiff could not assert such claims and the case had to proceed as a single plaintiff action. On the eve of the August 18, 2009 trial, the plaintiff stipulated to a dismissal of his individual claims with prejudice but reserved his right to appeal the Court's rulings regarding class and PAGA claims. KFC reserved its right to make any and all challenges to the appeal. On or about September 16, 2009, plaintiff filed a notice of appeal. Plaintiff filed his opening appellate brief on March 31, 2010, KFC filed its opposition brief on May 28, 2010 and plaintiff filed his reply brief on June 25, 2010.

KFC denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On October 2, 2009, a putative class action, styled Domonique Hines v. KFC U.S. Properties, Inc., was filed in California state court on behalf of all California hourly employees alleging various California Labor Code violations, including rest and meal break violations, overtime violations, wage statement violations and waiting time penalties. Plaintiff is a former non-managerial KFC restaurant employee represented by the same counsel that filed the Archila action described above. KFC filed an answer on October 28, 2009, in which it denied plaintiff's claims and allegations. KFC removed the action to the United States District Court for the Southern District of California on October 29, 2009. Plaintiff filed a motion for class certification on May 20, 2010 and KFC filed a brief in opposition. A hearing on plaintiff's motion was held on August 13, 2010, and the parties are awaiting a ruling. No trial date has been set.

KFC denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On August 18, 2010, a putative class action, styled Lisa Harrison and Noe Rivera v. KFC USA, Inc., KFC U.S. Properties, Inc., and KFC Corporation, was filed in California state court on behalf of all former California hourly employees alleging various California Labor Code violations, including failure to pay all vacation pay, failure to reimburse business expenses (mileage and uniforms), and waiting time penalties, as well as a claim of unfair competition. The defendants' answer or other response is due by October 12, 2010.

KFC denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On December 17, 2002, Taco Bell was named as the defendant in a class action lawsuit filed in the United States District Court for the Northern District of California styled Moeller, et al. v. Taco Bell Corp. On August 4, 2003, plaintiffs filed an amended complaint that alleges, among other things, that Taco Bell has discriminated against the class of people who use wheelchairs or scooters for mobility by failing to make its approximately 220 company-owned restaurants in California accessible to the class. Plaintiffs contend that queue rails and other architectural and structural elements of the Taco Bell restaurants relating to the path of travel and use of the facilities by persons with mobility-related disabilities do not comply with the U.S. Americans with Disabilities Act (the "ADA"), the Unruh Civil Rights Act (the "Unruh Act"), and the California Disabled Persons Act (the "CDPA"). Plaintiffs have requested: (a) an injunction from the District Court ordering Taco Bell to comply with the ADA and its implementing regulations; (b) that the District Court declare Taco Bell in violation of the ADA, the Unruh Act, and the CDPA; and (c) monetary relief under the Unruh Act or CDPA. Plaintiffs, on behalf of the class, are seeking the minimum statutory damages per offense of either $4,000 under the Unruh Act or $1,000 under the CDPA for each aggrieved member of the class. Plaintiffs contend that there may be in excess of 100,000 individuals in the class.

On February 23, 2004, the District Court granted plaintiffs' motion for class certification. The class includes claims for injunctive relief and minimum statutory damages.

On May 17, 2007, a hearing was held on plaintiffs' Motion for Partial Summary Judgment seeking judicial declaration that Taco Bell was in violation of accessibility laws as to three specific issues: indoor seating, queue rails and door opening force. On August 8, 2007, the court granted plaintiffs' motion in part with regard to dining room seating. In addition, the court granted plaintiffs' motion in part with regard to door opening force at some restaurants (but not all) and denied the motion with regard to queue lines.

The parties participated in mediation on March 25, 2008, and again on March 26, 2009, without reaching resolution. On December 16, 2009, the court denied Taco Bell's motion for summary judgment on the ADA claims and ordered plaintiff to file a definitive list of remaining issues and to select one restaurant to be the subject of a trial. The trial will be bifurcated and the first stage will address equitable relief and whether violations existed at the restaurant. Taco Bell will have the opportunity to renew its motion for summary judgment on those issues. Depending on the findings in the first stage of the trial, the court may address the issue of damages in a separate, second stage.

Taco Bell denies liability and intends to vigorously defend against all claims in this lawsuit. Taco Bell has taken steps to address potential architectural and structural compliance issues at the restaurants in accordance with applicable state and federal disability access laws. The costs associated with addressing these issues have not significantly impacted our results of operations. It is not possible at this time to reasonably estimate the probability or amount of liability for monetary damages on a class wide basis to Taco Bell.

On March 14, 2007, a lawsuit styled Boskovich Farms, Inc. v. Taco Bell Corp. and Does 1 through 100 was filed in the Superior Court of the State of California, Orange County. Boskovich Farms, a supplier of produce to Taco Bell, alleged in its complaint, among other things, that it suffered damage to its reputation and business as a result of publications and/or statements it claims were made by Taco Bell in connection with Taco Bell's reporting of results of certain tests conducted during investigations on green onions used at Taco Bell restaurants. The parties participated in mediation on April 10, 2008, without reaching resolution. The arbitration panel heard the parties' cross motions for summary judgment on August 12, 2009. On August 14, 2009, the arbitration panel issued an opinion granting Taco Bell's motion for summary judgment and dismissing all of Boskovich's claims with prejudice. On September 23, 2009, Boskovich filed a motion to vacate the arbitration award. On January 6, 2010 the court heard oral arguments on Boskovich's motion to vacate and took the matter under submission. On March 24, 2010, the court denied plaintiff's motion and confirmed the arbitration award. Boskovich appealed to the Kentucky Court of Appeals on April 23, 2010. Taco Bell filed its response on May 19, 2010 and reserved the right to seek attorneys' fees for the cost of the appeals. Taco Bell denies liability and intends to vigorously defend against all claims in any arbitration and the lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On July 9, 2009, a putative class action styled Mark Smith v. Pizza Hut, Inc. was filed in the United States District Court for the District of Colorado. The complaint alleges that Pizza Hut did not properly reimburse its delivery drivers for various automobile costs, uniforms costs, and other job-related expenses and seeks to represent a class of delivery drivers nationwide under the Fair Labor Standards Act (FLSA) and Colorado state law. On January 4, 2010, plaintiffs filed a motion for conditional certification of a nationwide class of current and former Pizza Hut, Inc. delivery drivers. However, on March 11, 2010, the court granted Pizza Hut's pending motion to dismiss for failure to state a claim, with leave to amend. On March 31, 2010, plaintiffs filed an amended complaint, which in addition to the federal FLSA claims asserts state-law class action claims under the laws of 16 different states. Pizza Hut filed a motion to dismiss the amended complaint, and plaintiffs sought leave to amend their complaint a second time. On August 9, 2010, the court granted plaintiffs' motion to amend. Pizza Hut has filed another motion to dismiss the Second Amended Complaint.

Pizza Hut denies liability and intends to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of these cases cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

On August 6, 2010, a putative class action styled Jacquelyn Whittington v. Yum Brands, Inc., Taco Bell of America, Inc. and Taco Bell Corp. was filed in the United States District Court for the District of Colorado. The plaintiff seeks to represent a nationwide class of assistant managers who were allegedly misclassified and did not receive compensation for all hours worked and did not receive overtime pay after 40 hours in a week. The plaintiff also purports to represent a separate class of Colorado assistant managers under Colorado state law, which provides for daily overtime after 12 hours in a day. Yum has been dismissed from the case. Defendants filed their answer on September 20, 2010.

Taco Bell and the Company deny liability and intend to vigorously defend against all claims in this lawsuit. However, in view of the inherent uncertainties of litigation, the outcome of this case cannot be predicted at this time. Likewise, the amount of any potential loss cannot be reasonably estimated.

We are 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 consolidated financial condition or results of operations.

Earnings Per Common Share ("EPS") (Tables)

Earnings Per Common Share Table

	Quarter ended				Year to date
	9/4/10		9/5/09		9/4/10		9/5/09
Net Income - YUM! Brands, Inc.	$	357	$	334	$	884	$	855

Weighted-average common shares outstanding (for basic calculation)		473		472		473		469
Effect of dilutive share-based employee compensation		11		13		12		13
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)		484		485		485		482
Basic EPS	$	0.76	$	0.71	$	1.87	$	1.82
Diluted EPS	$	0.74	$	0.69	$	1.82	$	1.77
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation(a)		0.2		12.3		3.2		13.8

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

Shareholders' Equity (Tables)

Repurchase of Shares of the Company's Common Stock

		Shares Repurchased (thousands)		Dollar Value of Shares Repurchased			Remaining Dollar Value of Shares that may be Repurchased
Authorization Date	Authorization Expiration Date		2010		2010				2010
September 2009	September 2010		7,598		$	283		$	17
March 2010	March 2011		-			-			300
Total			7,598		$	283		$	317

Comprehensive Income

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Net Income - YUM! Brands, Inc.	$	357		$	334		$	884		$	855
Foreign currency translation adjustment		20			61			(27	)		126
Changes in fair value of derivatives, net of tax		(6	)		(16	)		23			(14	)
Reclassification of derivative (gains) losses to Net Income, net of tax		8			13			(22	)		19
Reclassification of pension actuarial losses to Net Income, net of tax		4			3			13			8
Total comprehensive income	$	383		$	395		$	871		$	994

Equity attributable to noncontrolling interests, rollforward

Noncontrolling interest as of December 26, 2009	$	89
Net Income - noncontrolling interest		17
Dividends declared		(19	)
Noncontrolling interest as of September 4, 2010	$	87

Items Affecting Comparability of Net Income and Cash Flows (Tables)

Facility Actions

	Quarter ended September 4, 2010
	China Division			YRI			U.S.		Worldwide
Refranchising (gain) loss(a)	$	(1	)	$	(1	)	$	-	$	(2	)

Store closure (income) costs(b)	$	(1	)	$	1		$	1	$	1
Store impairment charges		1			2			1		4
Closure and impairment (income) expenses	$	-		$	3		$	2	$	5

	Quarter ended September 5, 2009
	China Division		YRI			U.S.			Worldwide
Refranchising (gain) loss(a) (c)	$	-	$	12		$	(8	)	$	4

Store closure (income) costs(b)	$	-	$	(1	)	$	-		$	(1	)
Store impairment charges		2		-			4			6
Closure and impairment (income) expenses	$	2	$	(1	)	$	4		$	5

	Year to date ended September 4, 2010
	China Division			YRI		U.S.		Worldwide
Refranchising (gain) loss(a)(c)(d)	$	(5	)	$	5	$	51	$	51

Store closure (income) costs(b)	$	(1	)	$	-	$	2	$	1
Store impairment charges		6			6		8		20
Closure and impairment (income) expenses	$	5		$	6	$	10	$	21

	Year to date ended September 5, 2009
	China Division		YRI		U.S.			Worldwide
Refranchising (gain) loss(a) (c)	$	-	$	14	$	(23	)	$	(9	)

Store closure (income) costs(b)	$	-	$	-	$	3		$	3
Store impairment charges		6		5		17			28
Closure and impairment (income) expenses	$	6	$	5	$	20		$	31

(a)	Refranchising (gain) loss is not allocated to segments for performance reporting purposes.

(b)	Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.

(c)	During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

(d)

U.S. refranchising loss for the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S. During the quarter ended March 20, 2010 we offered to refranchise a substantial portion of our Company operated KFCs in the U.S. While we did not yet believe this restaurant group met the criteria to be classified as held for sale, we did, consistent with our historical policy, review the restaurant group for impairment as a result of our offer to refranchise. We determined that the carrying value of the restaurant group was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this restaurant group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a franchisee for the restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC-U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant group to date and resulted in a non-cash write down of the restaurants' carrying value totaling $73 million. No further impairment was recorded in the quarters ended June 12, 2010 or September 4, 2010 as we believed the carrying value of the restaurant group, adjusted for the write down described in the previous sentence, is recoverable. We continued to depreciate the pre-impairment charge carrying value of these restaurants through the quarter ended March 20, 2010 and continued to depreciate the post-impairment charge carrying value thereafter. We will continue to depreciate the post-impairment charge carrying value going forward until the date we believe the held for sale criteria for any restaurants are met. Additionally, we will continue to review the restaurant group, or any subset of the restaurant group if we believe we will refranchise as a subset, for any further necessary impairment. The $73 million write down does not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write down would be recorded, consistent with our historical policy, if the restaurant group, or any subset of the restaurant group, ultimately meets the criteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

Other (Income) Expense (Tables)

Other (Income) Expense Table

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Equity income from investments in unconsolidated affiliates	$	(14	)	$	(12	)	$	(34	)	$	(29	)
Gain upon consolidation of former unconsolidated affiliate in China(a)		-			-			-			(68	)
Foreign exchange net (gain) loss and other		3			(1	)		3			-
Other (income) expense	$	(11	)	$	(13	)	$	(31	)	$	(97	)

(a)	See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in China.

Supplemental Balance Sheet Information (Tables)

Accounts and Notes Receivable

	9/4/10			12/26/09
Accounts and notes receivable	$	283		$	274
Allowance for doubtful accounts		(34	)		(35	)
Accounts and notes receivable, net	$	249		$	239

Property, Plant and Equipment

	9/4/10			12/26/09
Property, plant and equipment, gross	$	7,230		$	7,247
Accumulated depreciation and amortization		(3,460	)		(3,348	)
Property, plant and equipment, net	$	3,770		$	3,899

Income Taxes (Tables)

Income taxes and effective tax rate table

	Quarter ended						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Income taxes	$	139		$	88		$	307		$	212
Effective tax rate		27.5	%		20.6	%		25.4	%		19.7	%

Reportable Operating Segments (Tables)

Revenue and Operating Profit by Segment

	Quarter ended					Year to date
Revenues	9/4/10		9/5/09			9/4/10		9/5/09
China Division	$	1,188	$	994		$	2,783	$	2,291
YRI(a)		704		730			2,101		2,012
U.S.		970		1,055			2,897		3,200
Unallocated Franchise and license fees and income(b)(c)		-		(1	)		-		(32	)
	$	2,862	$	2,778		$	7,781	$	7,471

	Quarter ended						Year to date
Operating Profit	9/4/10			9/5/09			9/4/10			9/5/09
China Division (d)	$	267		$	216		$	582		$	449
YRI		142			120			405			346
United States		168			171			495			497
Unallocated Franchise and license fees and income(b)(c)		-			(1	)		-			(32	)
Unallocated Occupancy and other(c)		2			-			5			-
Unallocated and corporate expenses(c)		(36	)		(33	)		(106	)		(122	)
Unallocated Other income (expense)(c)(e)		(1	)		1			(1	)		68
Unallocated Refranchising gain (loss)(c)		2			(4	)		(51	)		9
Operating Profit		544			470			1,329			1,215
Interest expense, net		(38	)		(42	)		(121	)		(138	)
Income Before Income Taxes	$	506		$	428		$	1,208		$	1,077

(a)	Includes revenues of $238 million and $268 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $742 million and $737 million for the years to date ended September 4, 2010 and September 5, 2009, respectively, for entities in the United Kingdom.

(b)	Amount consists of reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken (See Note 4).

(c)	Amounts have not been allocated to the China Division, YRI or U.S. segments for performance reporting purposes.

(d)	Includes equity income from investments in unconsolidated affiliates of $14 million and $12 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $34 million and $29 million for the years to date ended September 4, 2010 and September 5, 2009, respectively.

(e)	The year to date ended September 5, 2009 includes a $68 million gain recognized upon our acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFCs in Shanghai, China. See Note 4 for further discussion of this transaction.

Pension Benefits (Tables)

Components of Net Periodic Benefit Cost

	U.S. Pension Plans						International Pension Plans
	Quarter ended						Quarter ended
	9/4/10			9/5/09			9/4/10			9/5/09
Service cost	$	5		$	6		$	1		$	2
Interest cost		15			13			2			2
Expected return on plan assets		(16	)		(13	)		(1	)		(1	)
Amortization of net loss		5			3			-			-
Net periodic benefit cost	$	9		$	9		$	2		$	3

	U.S. Pension Plans						International Pension Plans
	Year to date						Year to date
	9/4/10			9/5/09			9/4/10			9/5/09
Service cost	$	17		$	18		$	4		$	4
Interest cost		43			40			6			5
Expected return on plan assets		(48	)		(40	)		(6	)		(4	)
Amortization of net loss		16			9			1			1
Net periodic benefit cost	$	28		$	27		$	5		$	6

Derivative Instruments (Tables)

Fair Values Table


	9/4/2010		12/26/09		Condensed Consolidated Balance Sheet Location
Interest Rate Swaps - Asset	$	16	$	-	Prepaid expenses and other current assets
Interest Rate Swaps - Asset		41		44	Other assets
Foreign Currency Forwards - Asset		20		6	Prepaid expenses and other current assets
Foreign Currency Forwards - Liability		(2)		(3)	Accounts payable and other current liabilities
Total	$	75	$	47

Other Comprehensive Income (OCI) Table

	Quarter ended				Year to date
	9/4/10		9/5/09		9/4/10		9/5/09
Gains (losses) recognized into OCI, net of tax	$	(6)	$	(16)	$	23	$	(14)
Gains (losses) reclassified from Accumulated OCI into income, net of tax	$	(8)	$	(13)	$	22	$	(19)

Fair Value Disclosures (Tables)

Fair Value Measurements, Recurring Basis, Table

	Fair Value
	Level		9/4/10		12/26/09
Foreign Currency Forwards, net		2	$	18	$	3
Interest Rate Swaps, net		2		57		44
Other Investments		1		13		13
Total			$	88	$	60

Financial Statement Presentation (Details) (USD $)

In Millions

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 05, 2009

Notes to Financial Statements [Abstract]

Decrease in Company Sales for China Division and Increase in Company Sales for International Division due to a management reporting structure change related to the Thailand and KFC Taiwan Businesses

$ 68

$ 179

Decrease in Operating Profit for China Division and Increase in Operating Profit for International Division due to a management reporting structure change related to the Thailand and KFC Taiwan Businesses

1

4

Change in Cash and Cash Equivalents due to consolidation of an entity in China

17

Earnings Per Common Share ("EPS") (Details) (USD $)

In Millions, except Per Share data

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Schedule of Earnings Per Share Diluted By Common Class and Schedule of Earnings Per Share Basic By Common Class [Abstract]

Net Income - YUM! Brands, Inc.

$ 357

$ 334

$ 884

$ 855

Weighted-average common shares outstanding (for basic calculation)

473

472

473

469

Effect of dilutive share-based employee compensation

11

13

12

13

Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)

484

485

482

Basic EPS

0.76

0.71

1.87

1.82

Diluted EPS

$ 0.74

$ 0.69

$ 1.82

$ 1.77

Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation

0 ¹

12 ¹

3 ¹

14 ¹

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

Shareholders' Equity (Details)

In Millions, except Share data in Thousands

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Repurchase Of Shares Of The Company's Common Stock [Line Items]

Shares Repurchased

7,598

Dollar Value of Shares Repurchased

283

Remaining dollar value of shares that may be repurchased

317

Comprehensive Income

Net Income - YUM! Brands, Inc.

357

334

884

855

Foreign currency translation adjustment

20

61

(27)

126

Changes in fair value of derivatives, net of tax

(6)

(16)

23

(14)

Reclassification of derivative (gains) losses to Net Income, net of tax

8

13

(22)

19

Reclassification of pension actuarial losses to Net Income, net of tax

4

3

13

8

Total comprehensive income

383

395

871

994

Equity attributable to noncontrolling interests, rollforward

Noncontrolling interest

89

Net Income - noncontrolling interest

10

6

17

10

Dividends declared

(19)

Noncontrolling interest

87

September 2009 [Member]

Repurchase Of Shares Of The Company's Common Stock [Line Items]

Shares Repurchased

7,598

Dollar Value of Shares Repurchased

283

Expiration Date

September 2010

Remaining dollar value of shares that may be repurchased

17

March 2010 [Member]

Repurchase Of Shares Of The Company's Common Stock [Line Items]

Shares Repurchased

0

Dollar Value of Shares Repurchased

0

Expiration Date

March 2011

Remaining dollar value of shares that may be repurchased

300

Items Affecting Comparability of Net Income and Cash Flows (Details)

In Millions

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

6 Months Ended
Jun. 13, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Jul. 01, 2010

Dec. 26, 2009

May 04, 2009

May 03, 2009

Aug. 24, 2010

Aug. 20, 2009

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

3 Months Ended
Sep. 04, 2010

3 Months Ended
Mar. 20, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

3 Months Ended
Sep. 04, 2010

3 Months Ended
Mar. 20, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Notes to Financial Statements [Abstract]

General and Administrative Productivity initiatives and realignment of resources in the U.S.

5

9

Unpaid portion of current severance liability related to U.S. Business Transformation

1

U.S. Business Transformation severance payments

1

5

Investments in U.S. Brands

1

32

Depreciation reduction on stores offered for sale in the U.S.

2

5

Number of company owned stores acquired in Russia

50

Number of franchise stores acquired in Russia

81

Amount of cash paid to acquire interest in restaurants in Russia

56

Amount of long term note receivable settled as part of an acquisition in Russia

11

Amount of long term debt assumed as part of an acquisition in Russia

10

Remaining balance of the purchase price anticipated to be paid in cash

11

Preliminary amount of goodwill in purchase price allocation related to an acquisition in Russia

74

Additional percentage of ownership acquired in the entity that operates KFCs in Shanghai, China

7

Number of KFCs operated by an entity in Shanghai, China

200

Amount paid to acquire an additional ownership percentage in the entity that operates KFCs in Shanghai, China

12

Ownership percentage in the entity that operates KFCs in Shanghai, China

58

51

Recorded Value Of Previously Held Ownership Prior To Acquisition

17

Gain on consolidation of a former unconsolidated affiliate in China

68

Impact on Company Sales due to consolidation of a former unconsolidated affiliate in China

98

Impact on Franchise and license fees and income due to consolidation of a former unconsolidated affiliate in China

(6)

Impact on Operating Profit due to consolidation of a former unconsolidated affiliate in China

3

Debt Instrument [Line Items]

Face Amount

350

250

Coupon Rate

3.875

4.25

5.30

Facility Actions [Abstract]

Refranchising (gain) loss

(2)¹

4

51

(9)

(1)¹

0 ¹

(5)¹

0 ¹

(1)¹

12

5

14

0 ¹

(8)¹

51

(23)¹

Store closure (income) costs

1 ⁴

(1)⁴

1 ⁴

3 ⁴

(1)⁴

0 ⁴

(1)⁴

0 ⁴

1 ⁴

(1)⁴

0 ⁴

1 ⁴

0 ⁴

2 ⁴

3 ⁴

Store impairment charges

4

6

20

28

1

2

6

2

0

6

5

1

4

8

17

Closures and impairment (income) expenses

5

21

31

0

2

5

6

3

(1)

6

5

2

4

10

20

Number of KFCs refranchised in Taiwan

124

Loss recognized upon refranchising of Taiwan equity market

10

Non-cash write-off of Goodwill related to Taiwan Refranchising

7

Carrying value of goodwill related to Taiwan business

30

Number of restaurants refranchised in the U.S.

98

Impairment of Long Lived Assets Held for Use related to restaurants offered to refranchise in the U.S.

73

Assets held for sale

23

32

[1] Refranchising (gain) loss is not allocated to segments for performance reporting purposes.

[2] During the quarter ended September 5, 2009 we recognized a $10 million refranchising loss as a result of our decision to offer to refranchise our KFC Taiwan equity market. During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write-off of $7 million of goodwill in determining the loss on refranchising of Taiwan. Neither of these losses resulted in a related income tax benefit, and neither loss was allocated to any segment for performance reporting purposes. The amount of goodwill write-off was based on the relative fair values of the Taiwan business disposed of and the portion of the business that was retained. The fair value of the business disposed of was determined by reference to the discounted value of the future cash flows expected to be generated by the restaurants and retained by the franchisee, which include a deduction for the anticipated royalties the franchisee will pay the Company associated with the franchise agreement entered into in connection with this refranchising transaction. The fair value of the Taiwan business retained consists of expected, net cash flows to be derived from royalties from franchisees, including the royalties associated with the franchise agreement entered into in connection with this refranchising transaction. We believe the terms of the franchise agreement entered into in connection with the Taiwan refranchising are substantially consistent with market. The remaining carrying value of goodwill related to our Taiwan business of $30 million, after the aforementioned write-off, was determined not to be impaired as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[3] U.S. refranchising loss for the year to date ended September 4, 2010 is the net result of gains from 98 restaurants sold and non-cash impairment charges related to our offers to refranchise restaurants in the U.S. During the quarter ended March 20, 2010 we offered to refranchise a substantial portion of our Company operated KFCs in the U.S. While we did not yet believe this restaurant group met the criteria to be classified as held for sale, we did, consistent with our historical policy, review the restaurant group for impairment as a result of our offer to refranchise. We determined that the carrying value of the restaurant group was not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows anticipated while we continue to operate the restaurants as company units. Accordingly, we wrote this restaurant group down to our estimate of its fair value, which is based on the sales price we would expect to receive from a franchisee for the restaurant group. This fair value determination considered current market conditions, real-estate values, trends in the KFC-U.S. business, prices for similar transactions in the restaurant industry and preliminary offers for the restaurant group to date and resulted in a non-cash write down of the restaurants carrying value totaling $73 million. No further impairment was recorded in the quarters ended June 12, 2010 or September 4, 2010 as we believed the carrying value of the restaurant group, adjusted for the write down described in the previous sentence, is recoverable. We continued to depreciate the pre-impairment charge carrying value of these restaurants through the quarter ended March 20, 2010 and continued to depreciate the post-impairment charge carrying value thereafter. We will continue to depreciate the post-impairment charge carrying value going forward until the date we believe the held for sale criteria for any restaurants are met. Additionally, we will continue to review the restaurant group, or any subset of the restaurant group if we believe we will refranchise as a subset, for any further necessary impairment. The $73 million write down does not include any allocation of the KFC reporting unit goodwill in the restaurant group carrying value. This additional non-cash write down would be recorded, consistent with our historical policy, if the restaurant group, or any subset of the restaurant group, ultimately meets the criteria to be classified as held for sale. We will also be required to record a charge for the fair value of our guarantee of future lease payments for leases we assign to the franchisee upon any sale.

[4] Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.

Other (Income) Expense (Details) (USD $)

In Millions

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Other (Income) Expense Table

Equity income from investments in unconsolidated affiliates

$ (14)

$ (12)

$ (34)

$ (29)

Gain Upon Consolidation of Former Unconsolidated Affiliate in China

0

(68)¹

Foreign exchange net (gain) loss and other

3

(1)

3

0

Other (income) expense

$ (11)

$ (13)

$ (31)

$ (97)

[1] See Note 4 for further discussion of the consolidation of a former unconsolidated affiliate in China.

Supplemental Balance Sheet Information (Details) (USD $)

In Millions

Sep. 04, 2010

Dec. 26, 2009

Notes to Financial Statements [Abstract]

Accounts and notes receivable

$ 283

$ 274

Allowance for doubtful accounts

(34)

(35)

Accounts and notes receivable, net

249

239

Property, plant and equipment, gross

7,230

7,247

Accumulated depreciation and amortization

(3,460)

(3,348)

Property, plant and equipment, net

$ 3,770

$ 3,899

Income Taxes (Details) (USD $)

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Income Tax And Effective Tax Rate [Abstract]

Income taxes

$ 139,000,000

$ 88,000,000

$ 307,000,000

$ 212,000,000

Effective tax rate

27.5

20.6

25.4

19.7

U.S. Federal Statutory rate

35

Gain upon consolidation of a former unconsolidated affiliate in China

68,000,000

Estimated Impact of Proposed IRS Adjustment on Additional Taxable Income

2,000,000,000

Estimated Impact of Proposed IRS Adjustment on Additional Taxes, for fiscal years examined

700,000,000

Estimated Impact of Proposed IRS Adjustment on Additional Interest, for fiscal years examined

145,000,000

Estimated Impact of Proposed IRS Adjustment on Additional Taxes, for fiscal years potentially subject to future examination

280,000,000

Estimated Impact of Proposed IRS Adjustment on Additional Interest, for fiscal years potentially subject to future examination

15,000,000

Reportable Operating Segments (Details) (USD $)

In Millions

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Segment Reporting Information [Line Items]

Total revenues

$ 2,862

$ 2,778

$ 7,781

$ 7,471

Operating Profit

544

470

1,329

1,215

Interest expense, net

(38)

(42)

(121)

(138)

Income Before Income Taxes

506

428

1,208

1,077

Equity income from investments in unconsolidated affiliates

14

12

34

29

Gain on consolidation of a former unconsolidated affiliate in China

68

Reporting Segment China Division [Member]

Segment Reporting Information [Line Items]

Total revenues

1,188

994

2,783

2,291

Operating Profit

267 ¹

216 ¹

582 ¹

449 ¹

Equity income from investments in unconsolidated affiliates

14

12

34

29

Reporting Segment YRI [Member]

Segment Reporting Information [Line Items]

Total revenues

704 ²

730 ²

2,101 ²

2,012 ²

Operating Profit

142

120

405

346

Reporting Segment US [Member]

Segment Reporting Information [Line Items]

Total revenues

970

1,055

2,897

3,200

Operating Profit

168

171

495

497

Reporting Segment Unallocated Franchise And License Fees And Income [Member]

Segment Reporting Information [Line Items]

Total revenues

0

(1)

0

(32)

Operating Profit

0

(1)

0

(32)

Reporting Segment Unallocated Occupancy And Other [Member]

Segment Reporting Information [Line Items]

Operating Profit

2 ⁴

0 ⁴

5 ⁴

0 ⁴

Reporting Segment Unallocated And Corporate Expenses [Member]

Segment Reporting Information [Line Items]

Operating Profit

(36)⁴

(33)⁴

(106)⁴

(122)⁴

Reporting Segment Unallocated Other Income Expense [Member]

Segment Reporting Information [Line Items]

Operating Profit

(1)⁴

1 ⁴

(1)⁴

68

Reporting Segment Unallocated Refranchising Gain Loss [Member]

Segment Reporting Information [Line Items]

Operating Profit

2 ⁴

(4)⁴

(51)⁴

9 ⁴

Reporting Segment YRI United Kingdom [Member]

Segment Reporting Information [Line Items]

Total revenues

$ 238

$ 268

$ 742

$ 737

[1] Includes equity income from investments in unconsolidated affiliates of $14 million and $12 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $34 million and $29 million for the years to date ended September 4, 2010 and September 5, 2009, respectively.

[2] Includes revenues of $238 million and $268 million for the quarters ended September 4, 2010 and September 5, 2009, respectively, and $742 million and $737 million for the years to date ended September 4, 2010 and September 5, 2009, respectively, for entities in the United Kingdom.

[3] Amount consists of reimbursements to KFC franchisees for installation costs of ovens for the national launch of Kentucky Grilled Chicken (See Note 4).

[4] Amounts have not been allocated to the China Division, YRI or U.S. segments for performance reporting purposes.

[5] The year to date ended September 5, 2009 includes a $68 million gain recognized upon our acquisition of additional ownership in, and consolidation of, the operating entity that owns the KFCs in Shanghai, China. See Note 4 for further discussion of this transaction.

Pension Benefits (Details)

In Millions

9 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Defined Benefit Plan Disclosure [Line Items]

Service cost

5

6

17

18

1

2

4

Interest cost

15

13

43

40

2

6

5

Expected return on plan assets

(16)

(13)

(48)

(40)

(1)

(6)

(4)

Amortization of net loss

5

3

16

9

0

1

Net periodic benefit cost

9

28

27

2

3

5

6

Contribution to the U.S. Plan

0

Contribution to the U.K. Plan

17

Defined Benefit Plan Estimated Future Discretionary Employer Contributions In Remainder of Current Fiscal Year for the U.S. Pension Plan

75

Derivative Instruments (Details)

In Millions

3 Months Ended
Sep. 04, 2010

3 Months Ended
Sep. 05, 2009

9 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 05, 2009

Year Ended
Dec. 26, 2009

Notes to Financial Statements [Abstract]

Notional amount of interest rate derivative instruments outstanding

925

Notional amount of foreign currency derivatives

377

Derivatives, Fair Value [Line Items]

Total

75

47

Unrealized gains associated with interest rate swaps that hedge the interest rate risk for a portion of our debt and reported as an addition to short term borrowings

10

Unrealized gains associated with interest rate swaps that hedge the interest rate risk for a portion of our debt and reported as an addition to long-term debt

36

Reduction to Interest Expense, net for recognized gains on interest rate swaps

8

5

23

Derivative Instruments, Gain (Loss) [Line Items]

Gains (losses) recognized into OCI, net of tax

(6)

(16)

23

(14)

Gains (losses) reclassified from Accumulated OCI into income, net of tax

(8)

(13)

22

(19)

Net Deferred Loss within Accumulated Other Comprehensive Income due to treasury locks and forward starting interest rate swaps that have been cash settled

11

Interest Rate Swaps | Other Assets [Member]

Derivatives, Fair Value [Line Items]

Total

41

44

Interest Rate Swaps | Prepaid Expenses And Other Current Assets [Member]

Derivatives, Fair Value [Line Items]

Total

16

0

Foreign Currency Forwards | Prepaid Expenses And Other Current Assets [Member]

Derivatives, Fair Value [Line Items]

Total

20

6

Foreign Currency Forwards | Accounts Payable And Other Current Liabilities [Member]

Derivatives, Fair Value [Line Items]

Total

(2)

(3)

Fair Value Disclosures (Details) (USD $)

3 Months Ended
Sep. 04, 2010

9 Months Ended
Sep. 04, 2010

Dec. 26, 2009

Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]

Total

$ 88,000,000

$ 60,000,000

Total losses related to long-lived assets held for use and measured at fair value on a non-recurring basis

3,000,000

90,000,000

Impairment of long lived assets held for use included in closures and impairment (income) expenses

2,000,000

12,000,000

Impairment of long lived assets held for use included in Refranchising (gain) loss

1,000,000

78,000,000

Approximate number of restaurants in the restaurant groups offered for refranchising with long-lived assets that were deemed impaired on a held for use basis

660

Level 1

Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]

Other Investments

13,000,000

Level 2

Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items]

Foreign Currency Forwards, net

18,000,000

3,000,000

Interest Rate Swaps, net

57,000,000

44,000,000

Fair Value

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Debt obligations, excluding capital leases

3,800,000,000

Carrying Amount

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Debt obligations, excluding capital leases

3,300,000,000

Guarantees, Commitments and Contingencies (Details)

9 Months Ended
Sep. 04, 2010

Dec. 26, 2009

Notes to Financial Statements [Abstract]

Potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee

500,000,000

Present value of potential payments we could be required to make in the event of non-payment by the primary lessee

425,000,000

Loss Contingencies [Line Items]

Liabilities recorded for property and casualty losses

162,000,000

173,000,000

Minimum statutory damages per offense under Unruh Act

4,000

Minimum statutory damages per offense under California Disabled Persons Act

1,000

Number of individuals contended by plaintiffs that may be in the class

100,000

Guarantee of indebtedness of others

Loss Contingencies [Line Items]

Loss contingency estimate of possible loss

15,000,000

Total loans outstanding

64,000,000

Additional amount under the franchisee loan pool available for lending

16,000,000

Financial standby letter of credit

Loss Contingencies [Line Items]

Loss contingency estimate of possible loss

23,000,000

Equipment financing programs

Loss Contingencies [Line Items]

Loss contingency estimate of possible loss

30,000,000

Total loans outstanding

33,000,000

Document Information

9 Months Ended
Sep. 04, 2010

Document Type

10-Q

Amendment Flag

FALSE

Document Period End Date

2010-09-04

Entity Information

9 Months Ended
Sep. 04, 2010

Oct. 04, 2010

Entity Registrant Name

YUM BRANDS INC

Entity Central Index Key

0001041061

Current Fiscal Year End Date

12/25

Entity Filer Category

Large Accelerated Filer

Entity Common Stock, Shares Outstanding

468,583,606

Document Fiscal Year Focus

2010

Document Fiscal Period Focus

Q3