Document and Entity Information (USD $)

6 Months Ended
Jun. 11, 2011

Jul. 13, 2011

Jun. 12, 2010

Document And Entity Information [Abstract]

Entity Registrant Name

YUM BRANDS INC

Entity Central Index Key

0001041061

Current Fiscal Year End Date

--12-31

Entity Well-known Seasoned Issuer

Yes

Entity Voluntary Filers

No

Entity Current Reporting Status

Yes

Entity Filer Category

Large Accelerated Filer

Entity Public Float

$ 19,523,128,212

Entity Common Stock, Shares Outstanding

464,412,410

Document Fiscal Year Focus

2011

Document Fiscal Period Focus

Q2

Document Type

10-Q

Amendment Flag

FALSE

Document Period End Date

Jun. 11, 2011

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)

In Millions, except Per Share data

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Revenues

Company sales

$ 2,431

$ 2,220

$ 4,482

$ 4,216

Franchise and license fees and income

385

354

759

703

Total revenues

2,816

2,574

5,241

4,919

Company restaurants

Food and paper

792

699

1,454

1,324

Payroll and employee benefits

548

503

1,009

964

Occupancy and other operating expenses

705

652

1,273

1,222

Company restaurant expenses

2,045

1,854

3,736

3,510

General and administrative expenses

308

283

563

528

Franchise and license expenses

33

24

63

47

Closures and impairment (income) expenses

19

12

88

16

Refranchising (gain) loss

5 ¹ ²

(10)¹

3 ¹ ²

53 ¹ ² ³

Other (income) expense

(13)

(10)

(32)

(20)

Total costs and expenses, net

2,397

2,153

4,421

4,134

Operating Profit

419

421

820

785

Interest expense, net

35

42

78

83

Income Before Income Taxes

384

379

742

702

Income tax provision

62

90

153

168

Net Income – including noncontrolling interests

322

289

589

534

Net Income - noncontrolling interests

6

3

9

7

Net Income - YUM! Brands, Inc.

$ 316

$ 286

$ 580

$ 527

Basic Earnings Per Common Share

$ 0.67

$ 0.61

$ 1.23

$ 1.11

Diluted Earnings Per Common Share

$ 0.65

$ 0.59

$ 1.20

$ 1.09

Dividends Declared Per Common Share

$ 0.50

$ 0.21

$ 0.50

$ 0.42

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

[2] U.S. refranchising loss for the year to date ended June 12, 2010 included $73 million in non-cash impairment charges related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S. We recorded an additional $12 million and $2 million in non-cash impairment charges related to these restaurants in the quarters ended December 25, 2010 and June 11, 2011, respectively. The majority of these restaurants offered for sale in 2010 continue to be Company operated at June 11, 2011. We believed in 2010 and continue to believe at June 11, 2011 that the restaurant groups for which we have not yet entered into agreements to sell do not meet the criteria to be classified as held for sale. Consistent with our historical policy, we are reviewing these restaurant groups for impairment on a held for use basis each quarter as a result of our intent to refranchise. To the extent the carrying value of these restaurant groups are not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows while we continue to operate the restaurants, they are written down to current estimates of their fair value. These fair value estimates, which are based on the sales price we would expect to receive for each restaurant group, consider 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 any restaurant groups to date. We continue to depreciate the carrying values of the restaurant assets, net of the aforementioned impairment charges, and will continue to do so through the date we believe the held for sale criteria for any restaurant groups are met. The $85 million and $2 million in impairment charges recorded in 2010 and 2011, respectively, do not include any allocation of the KFC reporting unit goodwill in the restaurant groups’ carrying values. This additional non-cash write down is being recorded, consistent with our historical policy, when a 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.

[3] 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. This loss did not result in a related income tax benefit, and was not 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 included 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 consisted 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 believed the terms of the franchise agreement entered into in connection with the Taiwan refranchising were 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 subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)

In Millions

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Cash Flows - Operating Activities

Net Income - including noncontrolling interests

$ 589

$ 534

Depreciation and amortization

269

256

Closures and impairment (income) expenses

88

16

Refranchising (gain) loss

3 ¹ ²

53 ¹ ² ³

Contributions to defined benefit pension plans

(11)

(19)

Deferred income taxes

(48)

(78)

Equity income from investments in unconsolidated affiliates

(27)

(20)

Distributions of income received from unconsolidated affiliates

16

8

Excess tax benefits from share-based compensation

(22)

(23)

Share-based compensation expense

26

24

Changes in accounts and notes receivable

9

28

Changes in inventories

20

(19)

Changes in prepaid expenses and other current assets

(23)

2

Changes in accounts payable and other current liabilities

(71)

29

Changes in income taxes payable

72

54

Other, net

33

(12)

Net Cash Provided by Operating Activities

923

833

Cash Flows - Investing Activities

Capital spending

(330)

(327)

Proceeds from refranchising of restaurants

49

83

Acquisition of restaurants from franchisees

(1)

(2)

Sales of property, plant and equipment

9

13

Increase in restricted cash

(300)

0

Other, net

(6)

Net Cash Used in Investing Activities

(579)

(239)

Cash Flows - Financing Activities

Repayments of long-term debt

(658)

(8)

Revolving credit facilities, three months or less, net

350

(5)

Short-term borrowings by original maturity

More than three months - proceeds

0

More than three months - payments

0

Three months or less, net

0

(3)

Repurchase shares of Common Stock

(319)

(247)

Excess tax benefits from share-based compensation

22

23

Employee stock option proceeds

22

44

Dividends paid on Common Stock

(234)

(197)

Other, net

(23)

(19)

Net Cash Used in Financing Activities

(840)

(412)

Effect of Exchange Rates on Cash and Cash Equivalents

25

(5)

Net Increase (Decrease) in Cash and Cash Equivalents

(471)

177

Cash and Cash Equivalents - Beginning of Period

1,426

353

Cash and Cash Equivalents - End of Period

$ 955

$ 530

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

[2] U.S. refranchising loss for the year to date ended June 12, 2010 included $73 million in non-cash impairment charges related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S. We recorded an additional $12 million and $2 million in non-cash impairment charges related to these restaurants in the quarters ended December 25, 2010 and June 11, 2011, respectively. The majority of these restaurants offered for sale in 2010 continue to be Company operated at June 11, 2011. We believed in 2010 and continue to believe at June 11, 2011 that the restaurant groups for which we have not yet entered into agreements to sell do not meet the criteria to be classified as held for sale. Consistent with our historical policy, we are reviewing these restaurant groups for impairment on a held for use basis each quarter as a result of our intent to refranchise. To the extent the carrying value of these restaurant groups are not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows while we continue to operate the restaurants, they are written down to current estimates of their fair value. These fair value estimates, which are based on the sales price we would expect to receive for each restaurant group, consider 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 any restaurant groups to date. We continue to depreciate the carrying values of the restaurant assets, net of the aforementioned impairment charges, and will continue to do so through the date we believe the held for sale criteria for any restaurant groups are met. The $85 million and $2 million in impairment charges recorded in 2010 and 2011, respectively, do not include any allocation of the KFC reporting unit goodwill in the restaurant groups’ carrying values. This additional non-cash write down is being recorded, consistent with our historical policy, when a 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.

[3] 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. This loss did not result in a related income tax benefit, and was not 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 included 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 consisted 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 believed the terms of the franchise agreement entered into in connection with the Taiwan refranchising were 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 subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

In Millions

Jun. 11, 2011

Dec. 25, 2010

Current Assets

Cash and cash equivalents

$ 955

$ 1,426

Accounts and notes receivable, net

295

256

Inventories

173

189

Prepaid expenses and other current assets

232

269

Deferred income taxes

64

61

Advertising cooperative assets, restricted

122

112

Total Current Assets

1,841

2,313

Property, plant and equipment, net

3,907

3,830

Goodwill

672

659

Intangible assets, net

407

475

Investments in unconsolidated affiliates

143

154

Restricted cash

300

0

Other assets

516

519

Deferred income taxes

421

366

Total Assets

8,207

8,316

Current Liabilities

Accounts payable and other current liabilities

1,488

1,602

Income taxes payable

82

61

Short-term borrowings

19

673

Advertising cooperative liabilities

122

112

Total Current Liabilities

1,711

2,448

Long-term debt

3,269

2,915

Other liabilities and deferred credits

1,339

1,284

Total Liabilities

6,319

6,647

Shareholders' Equity

Common stock, no par value, 750 shares authorized; 465 shares and 469 shares issued in 2011 and 2010, respectively

0

86

Retained earnings

1,907

1,717

Accumulated other comprehensive income (loss)

(102)

(227)

Total Shareholders' Equity - YUM! Brands, Inc.

1,805

1,576

Noncontrolling interests

83

93

Total Shareholders' Equity

1,888

1,669

Total Liabilities and Shareholders' Equity

$ 8,207

$ 8,316

PARENTHETICAL DATA FOR CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

In Millions, except Per Share data

Jun. 11, 2011

Dec. 25, 2010

Shareholders' Equity (Deficit)

Common Stock, no par value

$ 0

Common Stock, shares authorized

750

Common Stock, shares issued

465

469

Financial Statement Presentation

We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements. Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the fiscal year ended December 25, 2010 (“2010 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 2010 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” or “China Division”), YUM Restaurants International (“YRI” or “International Division”) and United States. The China Division includes mainland China and YRI includes the remainder of our international operations.

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. The current fiscal year of 2011 will have a 53rd week. 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. Our international subsidiaries that operate on a monthly calendar, including China, are not impacted by the addition of a 53rd week. All of our international businesses except China close one period or one month earlier to facilitate consolidated reporting.

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

In our opinion, the accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2010 Form 10-K, our financial position as of June 11, 2011, and the results of our operations for the quarters and years to date ended June 11, 2011 and June 12, 2010 and cash flows for the years to date ended June 11, 2011 and June 12, 2010. 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)

Earnings Per Common Share (“EPS”)



	Quarter ended				Year to date
	6/11/2011		6/12/2010		6/11/2011		6/12/2010
Net Income – YUM! Brands, Inc.	$	316	$	286	$	580	$	527

Weighted-average common shares outstanding (for basic calculation)	471		473		472		474
Effect of dilutive share-based employee compensation	13		12		13		11
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	484		485		485		485
Basic EPS	$	0.67	$	0.61	$	1.23	$	1.11
Diluted EPS	$	0.65	$	0.59	$	1.20	$	1.09
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation^(a)	4.7		0.9		3.5		4.7


(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

Shareholders’ Equity

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the year to date ended June 11, 2011 and June 12, 2010, as indicated below. All amounts exclude applicable transaction fees.



		Shares Repurchased (thousands)				Dollar Value of Shares Repurchased						Remaining Dollar Value of Shares that may be Repurchased
Authorization Date	Authorization Expiration Date	2011		2010		2011			2010			2011		2010
September 2009	September 2010	—		6,848		$	—		$	252		$	—	$	48
March 2010	March 2011	3,441		—		171			—			—		300
January 2011	June 2012	2,620		—		137			—			613		—
Total		6,061	^(a)	6,848	^(b)	$	308	^(a)	$	252	^(b)	$	613	$	348


(a)	Amount excludes the effect of $19 million in share repurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010 fiscal year end and includes the effect of $8 million in share repurchases (0.1 million shares) with trade dates prior to June 11, 2011 but with settlement dates subsequent to June 11, 2011.


(b)	Amount includes the effect of $5 million in share repurchases (0.1 million shares) with trade dates prior to June 12, 2010 but with settlement dates subsequent to June 12, 2010.

Comprehensive income was as follows:



	Quarter ended						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Net Income – YUM! Brands, Inc.	$	316		$	286		$	580		$	527
Foreign currency translation adjustment	69			(16		)	117			(47		)
Changes in fair value of derivatives, net of tax	(4		)	10			(10		)	34
Reclassification of derivative (gains) losses to Net Income, net of tax	5			(13		)	11			(35		)
Reclassification of pension actuarial losses to Net Income, net of tax	5			5			10			9
Total comprehensive income – YUM! Brands, Inc.	$	391		$	272		$	708		$	488

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



Noncontrolling interests as of December 25, 2010	$	93
Net Income – noncontrolling interests	9
Foreign currency translation adjustment	2
Dividends declared	(21		)
Noncontrolling interests as of June 11, 2011	$	83

Items Affecting Comparability of Net Income and/or Cash Flows

Planned Sale of LJS and A&W

During the quarter ended March 19, 2011 we decided to sell our LJS and A&W brands. While we do not believe the LJS and A&W asset groups comprising these brands meet the criteria for held for sale classification, our decision to sell is considered an impairment indicator. As such, we reviewed the LJS and A&W asset groups for potential impairment in both the quarters ended March 19, 2011 and June 11, 2011. In the quarter ended March 19, 2011 we determined that the asset groups' carrying values were not recoverable based on our estimates of holding period cash flows while we continue to own the brands and expected proceeds upon sale. Accordingly, we wrote the carrying values of the LJS and A&W asset groups down to our estimate of their fair values, which reflected the sales prices we would expect to receive from potential buyers. This resulted in a non-cash write down of the LJS and A&W asset groups’ carrying values totaling $66 million that was allocated to definite-lived trademarks and franchise contract rights. We determined that no further impairment was necessary in the quarter ended June 11, 2011, as the carrying amounts of the asset groups were deemed recoverable. We will continue to amortize the definite-lived trademarks and franchise contract rights until the LJS and A&W asset groups are considered held for sale. Additionally, we will continue to review the asset groups for any further necessary impairment through the date the brands are sold. The goodwill that was included in the LJS and A&W reporting unit was written off in a previous year.

Potential Acquisition of Additional Ownership in Little Sheep

We currently own 27% of the outstanding shares of Little Sheep Group Limited (“Little Sheep”), a Hot Pot concept headquartered in Inner Mongolia, China. On April 26, 2011, we announced that we had submitted a preliminary proposal to Little Sheep under which we would offer to acquire all outstanding shares of Little Sheep, other than a minority interest to be held by the chairman and other founding shareholders of Little Sheep. On May 12, 2011, we made a pre-conditional cash offer to acquire additional shares of Little Sheep for approximately $570 million. If approved, this would bring our total ownership to approximately 93% of the Little Sheep business. In connection with this potential acquisition, we have placed $300 million in escrow and provided a $300 million letter of credit to demonstrate availability of funds to acquire the additional shares in this business. The funds placed in escrow are restricted to the potential acquisition of Little Sheep and are separately presented in our Condensed Consolidated Balance Sheet as of June 11, 2011 and in our Condensed Consolidated Statement of Cash Flow for the year to date ended June 11, 2011.

Repayment of Senior Unsecured Notes

On April 15, 2011, we repaid $650 million of Senior Unsecured Notes upon their maturity primarily with existing cash on hand.

Facility Actions

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



	Quarter ended June 11, 2011
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^{(a) (e)}	$	(2	)	$	(1	)	$	8	$	5

Store closure (income) costs^(b)	$	—		$	—		$	2	$	2
Store impairment charges	3			7			7		17
Closure and impairment (income) expenses	$	3		$	7		$	9	$	19



	Quarter ended June 12, 2010
	China			YRI			U.S.			Worldwide
Refranchising (gain) loss ^(a)	$	(4	)	$	(1	)	$	(5	)	$	(10	)

Store closure (income) costs^(b)	$	—		$	(1	)	$	—		$	(1	)
Store impairment charges	5			2			6			13
Closure and impairment (income) expenses	$	5		$	1		$	6		$	12



	Year to date ended June 11, 2011
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^(a)	$	(3	)	$	(1	)	$	7	$	3

Store closure (income) costs^(b)	$	(1	)	$	1		$	3	$	3
Store impairment charges	4			8			7		19
Closure and impairment (income) expenses^(c)	$	3		$	9		$	10	$	22



	Year to date ended June 12, 2010
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^{(a) (d) (e)}	$	(4	)	$	6		$	51	$	53

Store closure (income) costs^(b)	$	—		$	(1	)	$	1	$	—
Store impairment charges	5			4			7		16
Closure and impairment (income) expenses	$	5		$	3		$	8	$	16


(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 March 19, 2011, we recognized an impairment charge of $66 million resulting from the planned sale of the LJS and A&W businesses that was not allocated to segments for performance reporting purposes and is not included in this table.

(d)

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. This loss did not result in a related income tax benefit, and was not 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 included 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 consisted 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 believed the terms of the franchise agreement entered into in connection with the Taiwan refranchising were 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 subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

(e)

U.S. refranchising loss for the year to date ended June 12, 2010 included $73 million in non-cash impairment charges related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S. We recorded an additional $12 million and $2 million in non-cash impairment charges related to these restaurants in the quarters ended December 25, 2010 and June 11, 2011, respectively. The majority of these restaurants offered for sale in 2010 continue to be Company operated at June 11, 2011. We believed in 2010 and continue to believe at June 11, 2011 that the restaurant groups for which we have not yet entered into agreements to sell do not meet the criteria to be classified as held for sale. Consistent with our historical policy, we are reviewing these restaurant groups for impairment on a held for use basis each quarter as a result of our intent to refranchise. To the extent the carrying value of these restaurant groups are not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows while we continue to operate the restaurants, they are written down to current estimates of their fair value. These fair value estimates, which are based on the sales price we would expect to receive for each restaurant group, consider 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 any restaurant groups to date. We continue to depreciate the carrying values of the restaurant assets, net of the aforementioned impairment charges, and will continue to do so through the date we believe the held for sale criteria for any restaurant groups are met. The $85 million and $2 million in impairment charges recorded in 2010 and 2011, respectively, do not include any allocation of the KFC reporting unit goodwill in the restaurant groups’ carrying values. This additional non-cash write down is being recorded, consistent with our historical policy, when a 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 June 11, 2011 and December 25, 2010 total $22 million and $23 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

In July 2010, the Financial Accounting Standards Board ("FASB") issued accounting guidance that requires new disclosures about an entity’s allowance for credit losses and the credit quality of its financing receivables. Existing disclosures were amended to require an entity to provide certain disclosures on a disaggregated basis by portfolio segment or by class of financing receivables. The new disclosures as of the end of a reporting period were effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period were effective for interim and annual reporting periods beginning on or after December 15, 2010. All necessary disclosures have been complied with in this Form 10-Q.

Other (Income) Expense



	Quarter ended						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Equity income from investments in unconsolidated affiliates	$	(11	)	$	(8	)	$	(27	)	$	(20	)
Foreign exchange net (gain) loss and other	(2		)	(2		)	(5		)	—
Other (income) expense	$	(13	)	$	(10	)	$	(32	)	$	(20	)

Supplemental Balance Sheet Information

Receivables



	6/11/2011			12/25/2010
Accounts and notes receivable	$	331		$	289
Allowance for doubtful accounts	(36		)	(33		)
Accounts and notes receivable, net	$	295		$	256



	6/11/2011			12/25/2010
Noncurrent notes receivable and direct financing leases	$	73		$	87
Allowance for doubtful accounts	(29		)	(30		)
Noncurrent notes receivable and direct financing leases, net	$	44		$	57

The Company’s receivables are primarily generated as a result of ongoing business relationships with our franchisees and licensees as a result of royalty and lease agreements. Trade receivables consisting of royalties from franchisees and licensees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable on our Condensed Consolidated Balance Sheets. Our financing receivables primarily consist of notes receivable and direct financing leases with franchisees which we enter into from time to time. Balances of notes receivable and direct financing leases due within one year are included in Accounts and notes receivable while non-current amounts are included in Other assets. The activity in the Allowance for doubtful accounts was not significant in the quarter and year to date ended June 11, 2011.

Property, Plant and Equipment



	6/11/2011			12/25/2010
Property, plant and equipment, gross	$	7,315		$	7,103
Accumulated depreciation and amortization	(3,408		)	(3,273		)
Property, plant and equipment, net	$	3,907		$	3,830

Income Taxes



	Quarter ended						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Income taxes	$	62		$	90		$	153		$	168
Effective tax rate	16.4		%	23.8		%	20.7		%	24.0		%

Our 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 second quarter 2011 rate was lower than the prior year primarily due to the more favorable impact of changes to audit reserves in certain foreign jurisdictions and prior year adjustments.

Year to date, our effective tax rate was lower than the prior year due to the favorable impact of those items mentioned above, partially offset by lapping a more favorable impact of foreign and U.S. tax effects attributable to ongoing foreign operations, including a 2010 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 approximately $700 million of additional taxes plus net interest to date of approximately $160 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 2010, computed on a similar basis to the 2004-2006 additional taxes, would be approximately $320 million plus net interest through 2010 of approximately $20 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 accordance with GAAP. 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

We identify our operating segments based on management responsibility. The China Division includes mainland China and YRI includes the remainder of our international operations. 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	6/11/2011		6/12/2010		6/11/2011		6/12/2010
China	$	1,180	$	887	$	2,086	$	1,595
YRI	753		693		1,419		1,397
U.S.	883		994		1,736		1,927
	$	2,816	$	2,574	$	5,241	$	4,919



	Quarter ended						Year to date
Operating Profit	6/11/2011			6/12/2010			6/11/2011			6/12/2010
China^(a)	$	182		$	139		$	397		$	315
YRI	145			122			303			263
United States	132			184			255			327
Unallocated Occupancy and other	3			3			6			3
Unallocated and corporate expenses	(41		)	(37		)	(79		)	(70		)
Unallocated Other income (expense)	3			—			7			—
Unallocated impairment expense^(b)	—			—			(66		)	—
Unallocated Refranchising gain (loss)	(5		)	10			(3		)	(53		)
Operating Profit	419			421			820			785
Interest expense, net	(35		)	(42		)	(78		)	(83		)
Income Before Income Taxes	$	384		$	379		$	742		$	702


(a)	Includes equity income from investments in unconsolidated affiliates of $11 million and $8 million for the quarters ended June 11, 2011 and June 12, 2010, respectively, and $27 million and $20 million for the years to date ended June 11, 2011 and June 12, 2010, respectively.


(b)	Amounts represent impairment charges resulting from the planned sale of the LJS and A&W businesses. See Note 4.

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 those 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
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Service cost	$	6		$	6		$	2		$	2
Interest cost	15			14			2			2
Expected return on plan assets	(17		)	(16		)	(3		)	(3		)
Amortization of net loss	7			6			1			1
Net periodic benefit cost	$	11		$	10		$	2		$	2

	U.S. Pension Plans						International Pension Plans
	Year to date						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Service cost	$	11		$	12		$	3		$	3
Interest cost	30			28			4			4
Expected return on plan assets	(33		)	(32		)	(5		)	(5		)
Amortization of net loss	14			11			1			1
Net periodic benefit cost	$	22		$	19		$	3		$	3

We made no contributions to the Plan during the year to date ended June 11, 2011 and no contributions to the Plan are anticipated in 2011. We made contributions of approximately $8 million to a plan in the U.K. during the year to date ended June 11, 2011 and no additional significant contributions are anticipated in 2011.

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 June 11, 2011, our interest rate derivative instruments outstanding had notional amounts of $550 million and have been designated as fair value hedges of a portion of our debt. All of the Company's interest rate swaps that have been designated as fair value hedges meet the shortcut method requirements 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 June 11, 2011, foreign currency forward contracts outstanding had a total notional amount of $465 million.

The fair values of derivatives designated as hedging instruments as of June 11, 2011 and December 25, 2010 were:



	6/11/2011			12/25/2010			Condensed Consolidated Balance Sheet Location
Interest Rate Swaps - Asset	$	—		$	8		Prepaid expenses and other current assets
Interest Rate Swaps - Asset	35			33			Other assets
Foreign Currency Forwards - Asset	—			7			Prepaid expenses and other current assets
Foreign Currency Forwards - Liability	(12		)	(3		)	Accounts payable and other current liabilities
Total	$	23		$	45

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 $29 million to Long-term debt at June 11, 2011 and as an addition of $5 million and $26 million to Short-term borrowings and Long-term debt, respectively at December 25, 2010. During the quarter and year to date ended June 11, 2011, Interest expense, net was reduced by $5 million and $13 million, respectively, for recognized gains on these interest rate swaps. During the quarter and year to date ended June 12, 2010, Interest expense, net was reduced by $8 million and $15 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
	6/11/2011			6/12/2010		6/11/2011			6/12/2010
Gains (losses) recognized into OCI, net of tax	$	(4	)	$	10	$	(10	)	$	34
Gains (losses) reclassified from Accumulated OCI into income, net of tax	$	(5	)	$	13	$	(11	)	$	35

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 June 11, 2011 and June 12, 2010.

Additionally, we had a net deferred loss of $12 million, net of tax, as of June 11, 2011 within Accumulated OCI due to treasury locks and forward starting interest rate swaps that were cash settled in prior years, as well as outstanding foreign currency forward contracts. The majority of this loss arose from the 2007 settlement of forward starting interest rate swaps entered into prior to the issuance of our Senior Unsecured Notes due in 2037, and is being recognized in interest expense through 2037 consistent with interest payments made on the related Senior Unsecured Notes. In the quarters and years to date ended June 11, 2011 and June 12, 2010, an insignificant amount was reclassified from Accumulated OCI to Interest expense, net as a result of these 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 June 11, 2011, 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

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 June 11, 2011.



	Fair Value
	Level	6/11/2011			12/25/2010
Foreign Currency Forwards, net	2	$	(12	)	$	4
Interest Rate Swaps, net	2	35			41
Other Investments	1	15			14
Total		$	38		$	59

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 where 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 June 11, 2011 and December 25, 2010.

In the quarter and year to date ended June 11, 2011, we recorded impairment charges of $22 million to write down long-lived assets of certain restaurants or groups of restaurants to their estimated fair values. The long-lived assets of these restaurants were deemed to be impaired on a held for use basis. The fair value measurements used in these impairment evaluations were made using significant unobservable inputs (Level 3). Of the $22 million impairment charge recorded in the quarter and year to date ended June 11, 2011, $15 million was recorded in Closures and impairment (income) expenses and $7 million was recorded in Refranchising (gain) loss.

The $15 million of impairment charges in Closures and impairment (income) expenses recorded in both the quarter and year to date ended June 11, 2011 resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The $7 million of impairment charges in Refranchising (gain) loss recorded in both the quarter and year to date ended June 11, 2011 related to writing down the assets of restaurants or restaurant groups offered for refranchising and deemed to be impaired on a held for use basis. The fair value measurements used in our impairment evaluation were based on estimates of the sales prices we anticipated receiving from a franchisee for the restaurant or restaurant groups. See Note 4 for further discussion of impairment related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S.

In the year to date ended June 11, 2011, we recorded an impairment charge of $66 million in Closures and impairment (income) expenses to write down the trademarks and franchise contract rights of A&W and LJS as a result of our decision to sell those brands. The asset groups comprising these brands were deemed impaired on a held for use basis and the fair value measurements used in our impairment evaluations included an estimate of the sales prices we anticipate receiving from the sale of the brands.

In the quarter and year to date ended June 12, 2010, we recorded impairment charges of $10 million and $87 million, respectively, to write down long-lived assets of certain restaurants or groups of restaurants to their estimated fair values. The long-lived assets of these restaurants were deemed to be impaired on a held for use basis. The fair value measurements used in these impairment evaluations were made using significant unobservable inputs (Level 3). The $10 million impairment charge in the quarter ended June 12, 2010 was recorded in Closures and impairment (income) expenses. Of the $87 million impairment charge recorded in the year to date June 12, 2010, $10 million was recorded in Closures and impairment (income) expenses and $77 million was recorded in Refranchising (gain) loss.

The $10 million of impairment charges in Closures and impairment (income) expenses recorded in both the quarter and year to date ended June 12, 2010 resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The $77 million of impairment charges in Refranchising (gain) loss recorded in the year to date ended June 12, 2010 related to writing down the assets of restaurants or restaurant groups offered for refranchising and deemed to be impaired on a held for use basis. The fair value measurements used in our impairment evaluation were based on estimates of the sales prices we anticipated receiving from a franchisee for the restaurant or restaurant groups. See Note 4 for further discussion of impairment related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S.

At June 11, 2011 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 $3.3 billion, compared to their carrying value of $3 billion. We estimated the fair value of debt using market quotes and calculations based on market rates.

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 June 11, 2011, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $525 million. The present value of these potential payments discounted at our pre-tax cost of debt at June 11, 2011 was approximately $475 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 June 11, 2011 was not material.

Franchise Loan Pool Guarantees

We have agreed to provide financial support, if required, to an 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 June 11, 2011. 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 $60 million with an additional $40 million available for lending at June 11, 2011.

In addition to the guarantee program described above, YUM has provided guarantees of $20 million on behalf of franchisees for several 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 nominal loans outstanding under these financing programs were approximately $24 million at June 11, 2011.

Insurance Programs

We are self-insured for a substantial portion of our current and prior years’ loss exposures 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 June 11, 2011 and December 25, 2010, we had liabilities recorded for self-insured property and casualty losses of $146 million and $150 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 both 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.

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. Phase two of the arbitration has been scheduled for early October, 2011. Phase three, which would address damages, has 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.

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 court has ruled that this case will be tried to the bench rather than a jury. That trial is scheduled to begin on February 6, 2012.

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.

Taco Bell was named as a defendant in a number of putative class action suits filed in 2007, 2008, 2009 and 2010 alleging violations of California labor laws including unpaid overtime, failure to pay wages on termination, failure to pay accrued vacation wages, failure to pay minimum wage, denial of meal and rest breaks, improper wage statements, unpaid business expenses, wrongful termination, discrimination, conversion and unfair or unlawful business practices in violation of California Business & Professions Code §17200. Plaintiffs also seek penalties for alleged violations of California's Labor Code under California's Private Attorneys General Act and statutory “waiting time” penalties and allege violations of California's Unfair Business Practices Act. Plaintiffs seek to represent a California state-wide class of hourly employees.

On May 19, 2009 the court granted Taco Bell's motion to consolidate these matters, and the consolidated case is styled In Re Taco Bell Wage and Hour Actions. 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. Plaintiffs filed their motion for class certification on December 30, 2010. Plaintiffs subsequently filed a motion to amend their class action complaint and to include an additional named plaintiff. The court denied the motion to amend but granted the motion to add an additional plaintiff. The class certification hearing took place on June 6, 2011. At that hearing, the court indicated it would deny certification as to the vacation claims. The court's ruling on class certification with respect to the remaining claims is pending. Taco Bell also filed, at the invitation of the court, a motion to stay the proceedings until the California Supreme Court rules on two cases concerning meal and rest breaks. That motion is also pending.

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 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 state court granted Taco Bell's motion to stay the Rosales case on May 28, 2010, and the matter remains stayed in Orange County Superior Court.

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 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. 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. On October 22, 2010, the District Court granted Plaintiff's motion to certify a class on the meal and rest break claims, but denied the motion to certify a class regarding alleged off-the-clock work. On November 1, 2010, KFC filed a motion requesting a stay of the case pending a decision from the California Supreme Court regarding the applicable standard for employer provision of meal and rest breaks. Plaintiff filed an opposition to that motion on November 19, 2010. On January 14, 2011, the District Court granted KFC's motion and stayed the entire action pending a decision from the California Supreme Court. 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 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.

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 exemplar trial for that restaurant began on June 6, 2011. The trial was bifurcated and the first stage addressed whether violations existed at the restaurant. Twelve alleged violations of the ADA and state law were tried. The trial ended on June 16, 2011, and the court indicated that it would find Taco Bell liable but did not indicate on which alleged violations it would find for plaintiffs or the basis for liability. The court has not issued a ruling. The court set an exemplar trial for damages on the single restaurant for December 12, 2011. Taco Bell will have the opportunity to renew its motion for summary judgment on those issues and the opportunity to move to decertify the class.

On June 20, 2011, the United States Supreme Court issued its ruling in Wal-Mart Stores, Inc. v. Dukes. The Supreme Court held that the class in that case was improperly certified. The same legal theory was used to certify the class in the Moeller case and Taco Bell intends to file a motion to decertify the class. During the exemplar trial, the court observed that the restaurant had been in full compliance with all laws since March, 2010, and Taco Bell intends to argue that, in light of the decision in the Dukes case, no damages class can be certified and that injunctive relief is not appropriate, regardless of class status.

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 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 dropped the uniform claims but, 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. The court has yet to rule on Pizza Hut's motion.

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, with the exception of California, of salaried 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. The Company has been dismissed from the case without prejudice. Taco Bell filed its answer on September 20, 2010, and the parties commenced class discovery, which is currently on-going. Taco Bell moved to compel arbitration of certain employees in the Colorado class. The court denied the motion as premature because no class has yet been certified.

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.

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
	6/11/2011		6/12/2010		6/11/2011		6/12/2010
Net Income – YUM! Brands, Inc.	$	316	$	286	$	580	$	527

Weighted-average common shares outstanding (for basic calculation)	471		473		472		474
Effect of dilutive share-based employee compensation	13		12		13		11
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	484		485		485		485
Basic EPS	$	0.67	$	0.61	$	1.23	$	1.11
Diluted EPS	$	0.65	$	0.59	$	1.20	$	1.09
Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted EPS computation^(a)	4.7		0.9		3.5		4.7


(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	2011		2010		2011			2010			2011		2010
September 2009	September 2010	—		6,848		$	—		$	252		$	—	$	48
March 2010	March 2011	3,441		—		171			—			—		300
January 2011	June 2012	2,620		—		137			—			613		—
Total		6,061	^(a)	6,848	^(b)	$	308	^(a)	$	252	^(b)	$	613	$	348


(a)	Amount excludes the effect of $19 million in share repurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010 fiscal year end and includes the effect of $8 million in share repurchases (0.1 million shares) with trade dates prior to June 11, 2011 but with settlement dates subsequent to June 11, 2011.


(b)	Amount includes the effect of $5 million in share repurchases (0.1 million shares) with trade dates prior to June 12, 2010 but with settlement dates subsequent to June 12, 2010.

Comprehensive Income



	Quarter ended						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Net Income – YUM! Brands, Inc.	$	316		$	286		$	580		$	527
Foreign currency translation adjustment	69			(16		)	117			(47		)
Changes in fair value of derivatives, net of tax	(4		)	10			(10		)	34
Reclassification of derivative (gains) losses to Net Income, net of tax	5			(13		)	11			(35		)
Reclassification of pension actuarial losses to Net Income, net of tax	5			5			10			9
Total comprehensive income – YUM! Brands, Inc.	$	391		$	272		$	708		$	488

Equity attributable to noncontrolling interests, rollforward



Noncontrolling interests as of December 25, 2010	$	93
Net Income – noncontrolling interests	9
Foreign currency translation adjustment	2
Dividends declared	(21		)
Noncontrolling interests as of June 11, 2011	$	83

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

Facility Actions



	Quarter ended June 11, 2011
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^{(a) (e)}	$	(2	)	$	(1	)	$	8	$	5

Store closure (income) costs^(b)	$	—		$	—		$	2	$	2
Store impairment charges	3			7			7		17
Closure and impairment (income) expenses	$	3		$	7		$	9	$	19



	Quarter ended June 12, 2010
	China			YRI			U.S.			Worldwide
Refranchising (gain) loss ^(a)	$	(4	)	$	(1	)	$	(5	)	$	(10	)

Store closure (income) costs^(b)	$	—		$	(1	)	$	—		$	(1	)
Store impairment charges	5			2			6			13
Closure and impairment (income) expenses	$	5		$	1		$	6		$	12



	Year to date ended June 11, 2011
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^(a)	$	(3	)	$	(1	)	$	7	$	3

Store closure (income) costs^(b)	$	(1	)	$	1		$	3	$	3
Store impairment charges	4			8			7		19
Closure and impairment (income) expenses^(c)	$	3		$	9		$	10	$	22



	Year to date ended June 12, 2010
	China			YRI			U.S.		Worldwide
Refranchising (gain) loss ^{(a) (d) (e)}	$	(4	)	$	6		$	51	$	53

Store closure (income) costs^(b)	$	—		$	(1	)	$	1	$	—
Store impairment charges	5			4			7		16
Closure and impairment (income) expenses	$	5		$	3		$	8	$	16


(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 March 19, 2011, we recognized an impairment charge of $66 million resulting from the planned sale of the LJS and A&W businesses that was not allocated to segments for performance reporting purposes and is not included in this table.

(d)

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. This loss did not result in a related income tax benefit, and was not 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 included 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 consisted 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 believed the terms of the franchise agreement entered into in connection with the Taiwan refranchising were 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 subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

(e)

U.S. refranchising loss for the year to date ended June 12, 2010 included $73 million in non-cash impairment charges related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S. We recorded an additional $12 million and $2 million in non-cash impairment charges related to these restaurants in the quarters ended December 25, 2010 and June 11, 2011, respectively. The majority of these restaurants offered for sale in 2010 continue to be Company operated at June 11, 2011. We believed in 2010 and continue to believe at June 11, 2011 that the restaurant groups for which we have not yet entered into agreements to sell do not meet the criteria to be classified as held for sale. Consistent with our historical policy, we are reviewing these restaurant groups for impairment on a held for use basis each quarter as a result of our intent to refranchise. To the extent the carrying value of these restaurant groups are not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows while we continue to operate the restaurants, they are written down to current estimates of their fair value. These fair value estimates, which are based on the sales price we would expect to receive for each restaurant group, consider 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 any restaurant groups to date. We continue to depreciate the carrying values of the restaurant assets, net of the aforementioned impairment charges, and will continue to do so through the date we believe the held for sale criteria for any restaurant groups are met. The $85 million and $2 million in impairment charges recorded in 2010 and 2011, respectively, do not include any allocation of the KFC reporting unit goodwill in the restaurant groups’ carrying values. This additional non-cash write down is being recorded, consistent with our historical policy, when a 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
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Equity income from investments in unconsolidated affiliates	$	(11	)	$	(8	)	$	(27	)	$	(20	)
Foreign exchange net (gain) loss and other	(2		)	(2		)	(5		)	—
Other (income) expense	$	(13	)	$	(10	)	$	(32	)	$	(20	)

Supplemental Balance Sheet Information (Tables)

Accounts and Notes Receivable



	6/11/2011			12/25/2010
Accounts and notes receivable	$	331		$	289
Allowance for doubtful accounts	(36		)	(33		)
Accounts and notes receivable, net	$	295		$	256



	6/11/2011			12/25/2010
Noncurrent notes receivable and direct financing leases	$	73		$	87
Allowance for doubtful accounts	(29		)	(30		)
Noncurrent notes receivable and direct financing leases, net	$	44		$	57

Property, Plant and Equipment



	6/11/2011			12/25/2010
Property, plant and equipment, gross	$	7,315		$	7,103
Accumulated depreciation and amortization	(3,408		)	(3,273		)
Property, plant and equipment, net	$	3,907		$	3,830

Income Taxes (Tables)

Income taxes and effective tax rate table



	Quarter ended						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Income taxes	$	62		$	90		$	153		$	168
Effective tax rate	16.4		%	23.8		%	20.7		%	24.0		%

Reportable Operating Segments (Tables)

Revenue and Operating Profit by Segment



	Quarter ended				Year to date
Revenues	6/11/2011		6/12/2010		6/11/2011		6/12/2010
China	$	1,180	$	887	$	2,086	$	1,595
YRI	753		693		1,419		1,397
U.S.	883		994		1,736		1,927
	$	2,816	$	2,574	$	5,241	$	4,919



	Quarter ended						Year to date
Operating Profit	6/11/2011			6/12/2010			6/11/2011			6/12/2010
China^(a)	$	182		$	139		$	397		$	315
YRI	145			122			303			263
United States	132			184			255			327
Unallocated Occupancy and other	3			3			6			3
Unallocated and corporate expenses	(41		)	(37		)	(79		)	(70		)
Unallocated Other income (expense)	3			—			7			—
Unallocated impairment expense^(b)	—			—			(66		)	—
Unallocated Refranchising gain (loss)	(5		)	10			(3		)	(53		)
Operating Profit	419			421			820			785
Interest expense, net	(35		)	(42		)	(78		)	(83		)
Income Before Income Taxes	$	384		$	379		$	742		$	702


(a)	Includes equity income from investments in unconsolidated affiliates of $11 million and $8 million for the quarters ended June 11, 2011 and June 12, 2010, respectively, and $27 million and $20 million for the years to date ended June 11, 2011 and June 12, 2010, respectively.


(b)	Amounts represent impairment charges resulting from the planned sale of the LJS and A&W businesses. See Note 4.

Pension Benefits (Tables)

Components of Net Periodic Benefit Cost



	U.S. Pension Plans						International Pension Plans
	Quarter ended						Quarter ended
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Service cost	$	6		$	6		$	2		$	2
Interest cost	15			14			2			2
Expected return on plan assets	(17		)	(16		)	(3		)	(3		)
Amortization of net loss	7			6			1			1
Net periodic benefit cost	$	11		$	10		$	2		$	2

	U.S. Pension Plans						International Pension Plans
	Year to date						Year to date
	6/11/2011			6/12/2010			6/11/2011			6/12/2010
Service cost	$	11		$	12		$	3		$	3
Interest cost	30			28			4			4
Expected return on plan assets	(33		)	(32		)	(5		)	(5		)
Amortization of net loss	14			11			1			1
Net periodic benefit cost	$	22		$	19		$	3		$	3

Derivative Instruments (Tables)

Fair Values of Derivatives Designated as Hedging Instruments



	6/11/2011			12/25/2010			Condensed Consolidated Balance Sheet Location
Interest Rate Swaps - Asset	$	—		$	8		Prepaid expenses and other current assets
Interest Rate Swaps - Asset	35			33			Other assets
Foreign Currency Forwards - Asset	—			7			Prepaid expenses and other current assets
Foreign Currency Forwards - Liability	(12		)	(3		)	Accounts payable and other current liabilities
Total	$	23		$	45

Other Comprehensive Income (OCI) from the Effective Portions of Gains and Loss of Foreign Currency Forward Contracts Table



	Quarter ended					Year to date
	6/11/2011			6/12/2010		6/11/2011			6/12/2010
Gains (losses) recognized into OCI, net of tax	$	(4	)	$	10	$	(10	)	$	34
Gains (losses) reclassified from Accumulated OCI into income, net of tax	$	(5	)	$	13	$	(11	)	$	35

Fair Value Disclosures (Tables)

Fair Value Measurements, Recurring Basis, Table



	Fair Value
	Level	6/11/2011			12/25/2010
Foreign Currency Forwards, net	2	$	(12	)	$	4
Interest Rate Swaps, net	2	35			41
Other Investments	1	15			14
Total		$	38		$	59

Financial Statement Presentation (Details)

6 Months Ended
Jun. 11, 2011

days

cases

violations

weeks

restaurants

plaintiffs

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Number of operating segments

three

Week added as a result of the fiscal year ending on the last Saturday in December

53rd

Frequency of adding a week as a result of the fiscal year ending on the last Saturday in December

five or six years

Next fiscal year with 53 weeks

2011

Number of weeks in each of the first three quarters of each fiscal year

12

Number of weeks in the fourth quarter of each fiscal year with 52 weeks

16

Number of weeks in the fourth quarter of each fiscal year with 53 weeks

17

Number of months in the first quarter for certain international subsidiaries that operate on monthly calendars

two

Number of months in the second quarter for certain international subsidiaries that operate on monthly calendars

three

Number of months in the third quarter for certain international subsidiaries that operate on monthly calendars

three

Number of months in the fourth quarter for certain international subsidiaries that operate on monthly calendars

four

Number of periods or months in advance that all international businesses except China close their books

one

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

In Millions, except Per Share data

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Earnings Per Share [Abstract]

Net Income - YUM! Brands, Inc.

$ 316

$ 286

$ 580

$ 527

Weighted-average common shares outstanding (for basic calculation)

471

473

472

474

Effect of dilutive share-based employee compensation

13

12

13

11

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

484

485

Basic EPS

$ 0.67

$ 0.61

$ 1.23

$ 1.11

Diluted EPS

$ 0.65

$ 0.59

$ 1.20

$ 1.09

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

4.7 ¹

0.9 ¹

3.5 ¹

4.7 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) (USD $)

In Millions, except Share data

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

12 Months Ended
Dec. 25, 2010

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

Shares Repurchased

6,061,000 ¹

6,848,000 ²

Dollar Value of Shares Repurchased

$ 308 ¹

$ 252 ²

Remaining dollar value of shares that may be repurchased

613

348

Value Of Share Repurchases In Current Fiscal Quarter But With Settlement Dates In Subsequent Fiscal Quarter

8

5

19

Share Repurchases In Current Fiscal Quarter But With Settlement Dates In Subsequent Fiscal Quarter

100,000

400,000

Comprehensive Income

Net Income - YUM! Brands, Inc.

316

286

580

527

Foreign currency translation adjustment

69

(16)

117

(47)

Changes in fair value of derivatives, net of tax

(4)

10

(10)

34

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

5

(13)

11

(35)

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

5

10

9

Total comprehensive income - YUM! Brands, Inc.

391

272

708

488

Equity attributable to noncontrolling interests, rollforward

Noncontrolling interests, beginning of period

93

Net Income - noncontrolling interests

6

3

9

7

Foreign currency translation adjustment

2

Dividends declared

(21)

Noncontrolling interests, end of period

83

93

September 2009 [Member]

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

Expiration Date

September 2010

Shares Repurchased

0

6,848,000

Dollar Value of Shares Repurchased

0

252

Remaining dollar value of shares that may be repurchased

0

48

March 2010 [Member]

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

Expiration Date

March 2011

Shares Repurchased

3,441,000

0

Dollar Value of Shares Repurchased

171

0

Remaining dollar value of shares that may be repurchased

0

300

January 2011 [Member]

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

Expiration Date

June 2012

Shares Repurchased

2,620,000

0

Dollar Value of Shares Repurchased

137

0

Remaining dollar value of shares that may be repurchased

$ 613

$ 0

[1] Amount excludes the effect of $19 million in share repurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the 2010 fiscal year end and includes the effect of $8 million in share repurchases (0.1 million shares) with trade dates prior to June 11, 2011 but with settlement dates subsequent to June 11, 2011.

[2] Amount includes the effect of $5 million in share repurchases (0.1 million shares) with trade dates prior to June 12, 2010 but with settlement dates subsequent to June 12, 2010.

Items Affecting Comparability of Net Income and/or Cash Flows (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Dec. 25, 2010

Jun. 11, 2011

Little Sheep [Member]

May 13, 2011

Little Sheep [Member]

3 Months Ended
Jun. 11, 2011

China

3 Months Ended
Jun. 12, 2010

China

6 Months Ended
Jun. 11, 2011

China

6 Months Ended
Jun. 12, 2010

China

3 Months Ended
Jun. 11, 2011

YRI

3 Months Ended
Jun. 12, 2010

YRI

3 Months Ended
Mar. 20, 2010

YRI

restaurants

6 Months Ended
Jun. 11, 2011

YRI

6 Months Ended
Jun. 12, 2010

YRI

3 Months Ended
Jun. 11, 2011

U.S.

3 Months Ended
Jun. 12, 2010

U.S.

3 Months Ended
Dec. 25, 2010

U.S.

6 Months Ended
Jun. 11, 2011

U.S.

6 Months Ended
Jun. 12, 2010

U.S.

12 Months Ended
Dec. 25, 2010

U.S.

Facility Actions [Abstract]

Refranchising (gain) loss

$ 5 ¹ ²

$ (10)¹

$ 3 ¹ ²

$ 53 ¹ ² ³

$ (2)¹

$ (4)¹

$ (3)¹

$ (4)¹

$ (1)¹

$ 6 ¹ ³

$ 8 ¹ ²

$ (5)¹

$ 7 ¹ ²

$ 51 ¹ ²

Store closure (income) costs

2 ⁴

(1)⁴

3 ⁴

0 ⁴

(1)⁴

0 ⁴

(1)⁴

1 ⁴

(1)⁴

2 ⁴

0 ⁴

3 ⁴

1 ⁴

Store impairment charges

17

13

19

16

3

5

4

5

7

2

8

4

7

6

7

Closure and impairment (income) expenses

19

12

22 ⁵

16

3

5

3 ⁵

5

7

1

9 ⁵

3

9

6

10 ⁵

8

Impairment charge related to LJS and AW businesses not allocated to a segment

66

Number of KFCs refranchised in Taiwan

124

Non-cash write-off of Goodwill upon refranchsing of the Taiwan equity market

7

Carrying value of goodwill related to Taiwan business

30

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

2

12

2

73

85

Business Combinations [Abstract]

Current ownership percentage

27.00%

Pre-conditional cash offer for potential acquisition

570

Potential ownership percentage after acquisition

93.00%

Escrow deposit for potential acquisition

300

Letter of credit provided for potential acquisition

300

Repayments of Senior Unsecured Notes

650

Assets held for sale

$ 22

$ 23

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

[2] U.S. refranchising loss for the year to date ended June 12, 2010 included $73 million in non-cash impairment charges related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S. We recorded an additional $12 million and $2 million in non-cash impairment charges related to these restaurants in the quarters ended December 25, 2010 and June 11, 2011, respectively. The majority of these restaurants offered for sale in 2010 continue to be Company operated at June 11, 2011. We believed in 2010 and continue to believe at June 11, 2011 that the restaurant groups for which we have not yet entered into agreements to sell do not meet the criteria to be classified as held for sale. Consistent with our historical policy, we are reviewing these restaurant groups for impairment on a held for use basis each quarter as a result of our intent to refranchise. To the extent the carrying value of these restaurant groups are not recoverable based upon our estimate of expected refranchising proceeds and holding period cash flows while we continue to operate the restaurants, they are written down to current estimates of their fair value. These fair value estimates, which are based on the sales price we would expect to receive for each restaurant group, consider 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 any restaurant groups to date. We continue to depreciate the carrying values of the restaurant assets, net of the aforementioned impairment charges, and will continue to do so through the date we believe the held for sale criteria for any restaurant groups are met. The $85 million and $2 million in impairment charges recorded in 2010 and 2011, respectively, do not include any allocation of the KFC reporting unit goodwill in the restaurant groups’ carrying values. This additional non-cash write down is being recorded, consistent with our historical policy, when a 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.

[3] 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. This loss did not result in a related income tax benefit, and was not 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 included 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 consisted 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 believed the terms of the franchise agreement entered into in connection with the Taiwan refranchising were 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 subsequent to the refranchising as the fair value of the Taiwan reporting unit exceeded its carrying amount.

[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.

[5] During the quarter ended March 19, 2011, we recognized an impairment charge of $66 million resulting from the planned sale of the LJS and A&W businesses that was not allocated to segments for performance reporting purposes and is not included in this table.

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

In Millions

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Other Income and Expenses [Abstract]

Equity income from investments in unconsolidated affiliates

$ (11)

$ (8)

$ (27)

$ (20)

Foreign exchange net (gain) loss and other

(2)

(5)

0

Other (income) expense

$ (13)

$ (10)

$ (32)

$ (20)

Supplemental Balance Sheet Information (Details) (USD $)

In Millions, unless otherwise specified

6 Months Ended
Jun. 11, 2011

days

cases

violations

weeks

restaurants

plaintiffs

Dec. 25, 2010

Supplemental Balance Sheet Information Disclosure [Abstract]

Accounts and notes receivable

$ 331

$ 289

Allowance for doubtful accounts

(36)

(33)

Accounts and notes receivable, net

295

256

Noncurrent notes receivable and direct financing leases

73

87

Allowance for doubtful accounts

(29)

(30)

Noncurrent notes receivable and direct financing leases, net

44

57

Number of days from the period in which the corresponding sales occur that trade receivables are generally due

30

Number of years notes receivable and direct financing leases are due within to be included in Accounts and Notes Receivable

one

Property, plant and equipment, gross

7,315

7,103

Accumulated depreciation and amortization

(3,408)

(3,273)

Property, plant and equipment, net

$ 3,907

$ 3,830

Income Taxes (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Income Tax And Effective Tax Rate [Abstract]

Income taxes

$ 62

$ 90

$ 153

$ 168

Effective tax rate

16.40%

23.80%

20.70%

24.00%

U.S. Federal Statutory rate

35.00%

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

700

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

160

Estimated Impact of Proposed IRS Adjustment on Additional Taxes, for fiscal years potentially subject to future examination through 2010

320

Estimated Impact of Proposed IRS Adjustment on Additional Interest, for fiscal years potentially subject to future examination through 2010

$ 20

Reportable Operating Segments (Details) (USD $)

In Millions

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Segment Reporting Information [Line Items]

Total revenues

$ 2,816

$ 2,574

$ 5,241

$ 4,919

Operating Profit

419

421

820

785

Interest expense, net

(35)

(42)

(78)

(83)

Income Before Income Taxes

384

379

742

702

Equity income from investments in unconsolidated affiliates

11

8

27

20

China

Segment Reporting Information [Line Items]

Total revenues

1,180

887

2,086

1,595

Operating Profit

182 ¹

139 ¹

397 ¹

315 ¹

YRI

Segment Reporting Information [Line Items]

Total revenues

753

693

1,419

1,397

Operating Profit

145

122

303

263

U.S.

Segment Reporting Information [Line Items]

Total revenues

883

994

1,736

1,927

Operating Profit

132

184

255

327

Unallocated Occupancy and other

Segment Reporting Information [Line Items]

Operating Profit

3

6

3

Unallocated and corporate expenses

Segment Reporting Information [Line Items]

Operating Profit

(41)

(37)

(79)

(70)

Unallocated Other income (expense)

Segment Reporting Information [Line Items]

Operating Profit

3

0

7

0

Unallocated impairment expense

Segment Reporting Information [Line Items]

Operating Profit

0 ²

(66)²

0 ²

Unallocated Refranchising gain (loss)

Segment Reporting Information [Line Items]

Operating Profit

$ (5)

$ 10

$ (3)

$ (53)

[1] Includes equity income from investments in unconsolidated affiliates of $11 million and $8 million for the quarters ended June 11, 2011 and June 12, 2010, respectively, and $27 million and $20 million for the years to date ended June 11, 2011 and June 12, 2010, respectively.

[2] Amounts represent impairment charges resulting from the planned sale of the LJS and A&W businesses. See Note 4.

Pension Benefits (Details) (USD $)

In Millions

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

U.S. Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Service cost

$ 6

$ 11

$ 12

Interest cost

15

14

30

28

Expected return on plan assets

(17)

(16)

(33)

(32)

Amortization of net loss

7

6

14

11

Net periodic benefit cost

11

10

22

19

Contribution to the Plan

0

Anticipated Employer Contributions for Current Fiscal Year

0

International Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Service cost

2

3

Interest cost

2

4

Expected return on plan assets

(3)

(5)

Amortization of net loss

1

Net periodic benefit cost

2

3

U.K. Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Contribution to the Plan

8

Anticipated Employer Contributions for Current Fiscal Year

$ 0

Derivative Instruments (Details) (USD $)

In Millions

6 Months Ended
Jun. 11, 2011

12 Months Ended
Dec. 25, 2010

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional amount of interest rate derivative instruments outstanding

$ 550

Notional amount of foreign currency derivatives

465

Derivatives, Fair Value [Line Items]

Total

23

45

Interest Rate Swaps |
Prepaid expenses and other current assets

Derivatives, Fair Value [Line Items]

Total

0

8

Interest Rate Swaps |
Other assets

Derivatives, Fair Value [Line Items]

Total

35

33

Foreign Currency Forwards |
Prepaid expenses and other current assets

Derivatives, Fair Value [Line Items]

Total

0

7

Foreign Currency Forwards |
Accounts payable and other current liabilities

Derivatives, Fair Value [Line Items]

Total

(12)

(3)

Short-term borrowings

Derivatives, Fair Value [Line Items]

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 debt

5

Long-term debt

Derivatives, Fair Value [Line Items]

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 debt

$ 29

$ 26

Derivative Instruments (Details 2) (USD $)

In Millions

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Derivative Instruments, Gain (Loss) [Line Items]

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

$ 12

Interest Rate Swaps |
Fair value hedging |
Interest expense, net

Derivative Instruments, Gain (Loss) [Line Items]

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

5

8

13

15

Foreign Currency Forwards

Derivative Instruments, Gain (Loss) [Line Items]

Gains (losses) recognized into OCI, net of tax

(4)

10

(10)

34

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

$ (5)

$ 13

$ (11)

$ 35

Fair Value Disclosures (Details) (USD $)

In Millions

3 Months Ended
Jun. 11, 2011

3 Months Ended
Jun. 12, 2010

6 Months Ended
Jun. 11, 2011

6 Months Ended
Jun. 12, 2010

Dec. 25, 2010

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair value, level 1 to level 2 transfers

$ 0

Fair value, level 2 to level 1 transfers

0

Derivative assets (liabilites), net

23

45

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

22

10

22

87

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

15

10

15

10

Impairment charge related to LJS and AW businesses not allocated to a segment

66

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

7

77

Interest Rate Swaps |
Recurring basis |
Level 2

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Derivative assets (liabilites), net

35

41

Foreign Currency Forwards |
Recurring basis |
Level 2

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Derivative assets (liabilites), net

(12)

4

Recurring basis

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Total

38

59

Recurring basis |
Level 1

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Other Investments

$ 15

$ 14

Fair Value Disclosures (Details 2) (USD $)

In Billions

Jun. 11, 2011

Estimate of Fair Value

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

Debt obligations, excluding capital leases

$ 3.3

Carrying Amount

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

Debt obligations, excluding capital leases

$ 3.0

Guarantees, Commitments and Contingencies (Details) (Property Lease Guarantee [Member], USD $)

In Millions

Jun. 11, 2011

Property Lease Guarantee [Member]

Guarantor Obligations [Line Items]

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

$ 525

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

$ 475

Guarantees, Commitments and Contingencies (Details 2) (USD $)

6 Months Ended
Jun. 11, 2011

days

cases

violations

weeks

restaurants

plaintiffs

Dec. 25, 2010

Loss Contingencies [Line Items]

Liabilities recorded for property and casualty losses

$ 146,000,000

$ 150,000,000

Motion to stay proceedings until rulings on other California Supreme Court cases concerning meal and rest breaks, number of cases

2

Number of company-owned restaurants that may be in the class

220

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

Number of restaurant to be subject of trial on ADA claims

1

Number of alleged violations of ADA and state law tried

12

Number of states that assert state-law class action claims

16

Minimum number of hours worked per week after which overtime pay was not received

40

Minimum number of hours worked per day after which overtime pay was not received

12

Guarantee of indebtedness of others

Loss Contingencies [Line Items]

Amount of possible loss for contingencies

15,000,000

Total loans outstanding

60,000,000

Additional amount under the franchisee loan pool available for lending

40,000,000

Financial standby letter of credit

Loss Contingencies [Line Items]

Amount of possible loss for contingencies

23,000,000

Franchisee financing programs

Loss Contingencies [Line Items]

Amount of possible loss for contingencies

20,000,000

Total loans outstanding

$ 24,000,000