Steve Schmitt - VP, IR and Corporate Strategy David Novak - Chairman and CEO Pat Grismer - CFO

Joseph Buckley - Bank of America Merrill Lynch Brian Bittner - Oppenheimer & Company David Tarantino - Robert W. Baird Eric Larson - RBC Capital Markets Jeff Farmer - Wells Fargo Securities John Ivankoe - JPMorgan Keith Siegner - UBS Capital Markets Sara Senatore - Sanford Bernstein Jason West - Deutsche Bank Jake Bartlett - Morgan Stanley Andy Barish - Jefferies Diane Geissler - CLSA R. J. Hottovy - Morningstar Peter Saleh - Telsey Advisory Group

Good morning. My name is Joana and I will be your conference operator today. At this time, I would like to welcome everyone to the Yum! Brands’ First Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you, Steve Schmitt, VP of Investor Relations & Corporate Strategy, may begin your conference.

Thanks, Joana. Good morning everyone and thank you for joining us. On our call today are David Novak, Chairman and CEO; and Pat Grismer, our CFO. Following remarks from David and Pat, we will take your questions. Before we get started, I would like to remind you that this conference call includes forward-looking statements. Forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to the Investors section of the Yum! Brands’ Web site www.yum.com to find disclosures and reconciliations of non-GAAP financial measures that may be used on today’s call. We are broadcasting this call via our Web site. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording. As a reminder, at the beginning of this year we combined our Yum! Restaurant International and U.S. divisions into three global brand divisions; KFC, Pizza Hut and Taco Bell. China and India remained separate divisions giving their strategic importance and enormous growth potential. This new structure is designed to drive greater global brand focus enabling more effective knowhow sharing and accelerating growth. Beginning this quarter our financial reporting will reflect our new structure with comparable prior periods adjusted accordingly. Finally, we would like to remind you of the following upcoming Yum! investor events. Our Taco Bell Investor Day will be in Irvine, California on May 15th. And our second quarter earnings will be released on Wednesday, July 16th. With that, I would now like to turn the call over to David Novak.

Alright, thank you Steve and good morning everyone. I am pleased to report Yum! Brands is off to a strong start. Based on first quarter results and current sales trends we expect to deliver on the strong bounce back year we promised of at least 20% full year of EPS growth excluding special items. We had particularly strong results in China, emerging markets continue to have positive momentum and developed markets like KFC in the UK and Australia, were strong. However, like most retailers our U.S. business was soft driven impart by cold weather. Now as we see in the release, we’re obviously pleased to report our China division continues to steadily improve, with both KFC and Pizza Hut producing strong sales and margin growth, driving our first quarter EPS growth of 24% prior to special items. In total our China division delivered system sales growth of 17% in the quarter as we opened 123 new units and grew same-store sales by 9%. The China team deserves special tribute as operating profit grew an impressive 80% prior to foreign currency translation. As predicted, productivity gains that began in 2013 now coupled with rebounding sales are driving dramatic profit growth. Clearly the most significant driver of the strong bounce back year for Yum! is a continued sales recovery at our KFC business in China, which delivered same-store sales growth of 11% in the quarter. Remember this compares to a 4% same-store sales decline during the fourth quarter. Our China division also achieved 23.4% restaurant margins in the first quarter. This compares to a full year restaurant margin of 15.4% in 2013. Obviously seasonality plays a role but to put things into perspective, first quarter restaurant margin for our China division was essentially in line with what we delivered in the first quarter of 2012. Any way you look at it we’re pleased with our progress in China. Now if you recall we said last quarter that our focus at KFC China in 2014 was to bring more innovation and exciting news to our customers and that’s exactly what we’re doing. According to our research, we have regained consumer trust and are now beginning our journey to restage KFC at even more useful contemporary and energetic brand that is innovating for a changing China. This is built on three pillars, taste, customer experience and digital. We’re investing behind each of these for us, so the consumer wins. On March 26th, we announced the debut of an exciting new menu at KFC in our more than 4,600 restaurants in over 950 cities across China. This initiative is unprecedented in KFC’s 27 year history in China and in fact in the entire QSR industry as we introduced 15 products simultaneously. These products are either new or the return of popular items previously offered on a limited time-only basis. The breadth and variety of these products are expected to further strengthen KFC’s leadership in four signature product platforms, sandwiches, rice dishes, snacks as well as drinks and desserts. Going forward, we plan to do a similar menu update at least once a year. Now if you recall, we revamped 20% of the Pizza Hut Casual Dining menu twice a year, so we’re still in a page out of the successful Pizza Hut playbook. On the advertising front, we’re having a lot of fun using four useful and popular celebrities who are representing each of the product platforms. It’s early days but we’re pleased with this initiative and expect it to drive high levels of ongoing consumer engagement. Our advertising has already received over 7 million likes in the past three weeks, so clearly we’re having some fun, our customers are enjoying. Simultaneously, we’re launching redesigned packaging, contemporary staff uniforms, new menu boards and branded service. On the technology front, we’ve begun rolling out Wi-Fi and a number of other new digital initiatives. In fact we will have free Wi-Fi in over 2,000 restaurants by year-end, making us what we believe to be the number one retailer on that front. This is another example of how we’re providing customers a more contemporary environment in which to spend their time. We also have a new mobile app coming which will provide consumers the convenience of pre-ordering with electronic payment. The goal is to consistently bring exciting and dramatic news to the KFC brand across the year and keep it going. So, let me sum things up for KFC China, we’re early in the year but we’re extremely pleased with the progress we’re making with sales and margins and we expect to build-off our upward momentum balance of year. Now, as I’ve mentioned before Pizza Hut Casual Dining is arguably one of the greatest success stories in our industry the past three years. We’re clearly the number one western casual dining chain in China with hardly any multi-national competition. We have 1,100 restaurants in over 290 cities and we opened 43 new stores in the first quarter further strengthening our category leading position. We’re once again pleased with our same-store sales growth which was 8% in the first quarter. Our Pizza Hut more positioning backed by our strategy to refresh 20% of the menu every six months, as well as offer compelling values, is clearly resonating with consumers and driving results. We’re also continuing to leverage our assets throughout the day by expanding our breakfast offering into more and more cities. Importantly, we have an amazingly strong economic model that generates two year cash paybacks on new unit openings. With the terrific performance we’re seeing, we continue to broaden our new unit development of Pizza Hut Casual Dining and are aggressively expanding into lower tier cities. Without question, Pizza Hut Casual Dining is a growing powerhouse with a great future. The other exciting thing about Pizza Hut is we have a distinct home service brand in China where we deliver an all meal replacement to -- home meal replacement to Chinese consumers. And in fact around 40% of what we deliver is Chinese food. So not only are we delivering pizza but we’re delivering a full array of Chinese menu options. We now have over 200 units in 25 cities and we’re beginning to really scale this brand rapidly across the country. Importantly it’s a high return small box format and sales are almost totally incremental versus our casual dining concept. So, this brand is a separate brand with great potential. Remember Domino’s and Pizza Hut home delivery both have about 5,000 delivery focused units in United States today. With only around 200 units today in China, this brand is clearly poised for rapid growth in the years ahead. In 2014, we will be testing our Chinese concept East Dawning in lower tier cities and we’re working hard to turnaround Little Sheep which has clearly been a disappointment since we acquired it in 2012 and continues to be so. Now looking at the long-term, China obviously has a large and growing consuming class which is expect to double from 300 million people to 600 million people by 2020. We’re clearly in the right place at the right time with great brands that are absolutely loved by Chinese customers and we like how we’re positioned and what is still the world’s fastest growing economy which while slowing is still expected to grow more than 75 this year. So in 2014, our new unit development target of at least 700 new stores remains unchanged as we further capitalize on our leading positions in what remains the number one retail opportunity in the world. Moving to India, where we’re investing in the future in developing a great business which will drive substantial growth for YUM! in the years ahead. At KFC, we continue to innovate around local customer preferences and we’re excited about our second quarter launch of our new vegetarian line of products. We’re focused on strengthening our economic model as we expand in the lower tier cities. Our pizza delivery business is now outperforming our largest delivery competitor from a same-store sale standpoint. And in Taco Bell, we’re making progress developing a scalable economic model with the introduction of a small box format. And while it’s still early days, we’re confident Taco Bell will eventually be a successful business in India. Overall, we have over 700 restaurants in our India division and we’re full steam ahead with development as we expect to open 150 new units this year. This is on top of over 150 new units in 2013 and while country macros haven’t been as strong as we’d like we made the strategic decision to invest in building each of our brands in the country with well over a billion people. Now as you know, we recently combined our Yum! Restaurants International and U.S. divisions in the three global brand divisions, KFC, Pizza Hut, and Taco Bell, our intent is to have dedicated brand teams going to work every day focused only on KFC, Pizza Hut or Taco Bell to drive each even more aggrieve global growth. In fact we just concluded our strategic business reviews and we couldn’t be more pleased with how the organization is coming together. We’ve also never seen such singular brand focus or higher levels of knowhow sharing between the international and U.S. brand teams which is a big competitive advantage. An early benefit of our new brand structure is we expect to set a new development record with over 1,100 new international units outside of China and India this year. Now let me share our perspective on our new brand division results. Let’s start with KFC. In the first quarter, our KFC division which generates over 90% of its profit outside of the U.S. delivered a solid first quarter in a setup for a successful year. As you may know, we have nearly 14,000 restaurants in over 110 countries around the world, 99% of these KFC’s are franchised. Importantly, we have a strong track-record in emerging markets and we continue to grow our presence with each passing year. In fact 46% of KFC division sales outside of the U.S. in 2013 were generated in emerging markets compared to 40% in 2008. During this timeframe, we increased our store sales base nearly 60%. Looking ahead, our new unit opportunities in emerging markets is arguably the best in retail with about two KFC restaurants per million people in emerging markets we know we have a long runway for future growth. Moving to our developed markets, we have very solid businesses in Australia and the UK which both delivered strong results in the first quarter. We’re really focused on spreading knowhow and best practices from these two businesses to our underperforming markets in the United States and Canada. Now let’s talk about Pizza Hut which clearly had a disappointing quarter. On the positive side, our emerging markets business delivered solid same-store -- system sales growth of 8% in the quarter. Having said this, results were negatively impacted by very poor performance in our U.S. business which contributes about half of Pizza Hut division’s total profits. Same-store sales in the United States declined 5% in the quarter. We launched a new and improved hand-tossed pizza but the news wasn’t strong enough to overcome value focused competitor activity. Looking ahead, we expect that they are much better with competitive value, our national advertising of WingStreet and with product news like our new garlic parmesan pizza offering. We also intend to do a better job engaging the digital consumer where our competitors are frankly doing a better job driving activation. In fact we’ve committed significant additional resources to our digital agenda and I can assure you that we’re moving forward with a high sense of urgency. Outside the United States, we’re accelerating new unit development especially across the delivery and express channels. This is a great example of why we decided to reorganize the business as Pizza Hut now has dedicated brand focus that will drive international expansion at each of these segments. To sum it up, our top goals for 2014 are to accelerate our pace of global development and to turnaround our pizza U.S. business. We intend for Pizza Hut to ultimately become a double-digit profit grower for Yum! in the years ahead. Finally, at Taco Bell, both same-store sales and margins declined in the first quarter while dealing with the challenging weather, higher commodity inflation, and the overlap of 6% positive same-store sales in 2013, which was our strongest quarter of last year. While the quarter was below our ongoing expectations, we remain confident Taco Bell has all kinds of mojo going forward as we expect another strong year. The big news for Taco Bell is that on March 27 that’s the day which falls in the second quarter which went down in history as the day we launched our national breakfast platform. I am pleased to report we’re off to a great start and we are generating tremendous buzz around our advertising and products. I encourage you to try our A.M. Crunchwrap, Waffle Taco, and Cinnabon Delights. We have talked about products and talked about advertising and a breakfast line that is driving rave reviews for quality, affordability and value. Looking ahead, we’ll be introducing mobile ordering at Taco Bell and we have significant innovation plan for our core business that we believe will wow our customers in 2014 including a major new product launch in the second half. Our ongoing product innovation is back by solid operations and strong unit economics, which allows us to open at least 100 net new units this year on top of 78 net new units we opened in 2013. As you know our U.S. business represents 97% of Taco Bell’s global profits. We now have a dedicated international leadership team and have made additional investments in G&A to unlock the enormous development opportunities in front us. Given the power of the brand in the U.S. and its success in several other markets we believe Taco Bell will eventually become our third global brand. Taking a step back when you look at Yum! in total there are two important things to keep in mind; number one, we’re largely a franchise business as over 90% of our restaurants outside of China are owned and operated by franchisees. In 2014 we will generate about $2 billion in franchise fees which is a $1 billion increase since 2004. We simply love the franchise business model as it’s about as higher return business as you can possibly have; number two, Yum! Brands is the clear restaurant leader in emerging markets and we expect to build upon this position in the years ahead. And while we know emerging markets will have their ups and downs, we remain extremely bullish on our long-term prospects in these countries as the consuming class rapidly expands. Remember emerging market economies are expected to grow at almost three times the rate of developed market economies for the foreseeable future. Also remember, we only have two restaurants per million people in emerging markets. This compares about 58 restaurants per million people in United States today. That’s a long runway for growth and gives us tremendous confidence in our ability to continue our aggressive expansion for many years to come. So let me wrap things up for Yum! Brands, on the whole we’re off to a strong start to the year we’re extremely pleased with our continued momentum in China and we had impressive results in a number of other markets. And as Pat will tell you on a new division basis we had a solid quarter at KFC, Taco Bell is off to a slow start but we’re confident in the Brands positioning and plans balance of the year and we obviously have major work to do to get Pizza Hut on more competitive footing and we’re confident we will do so. All-in-all we believe we’re well positioned to deliver on the three things we know that drive shareholder value in retail; driving new unit development, building same-store sales growth, and doing these in a way that generates high returns. We’re confident we will have a strong bounce back year in 2014 growing EPS at least 20% and reestablish our track-record of consistently delivering double-digit earnings per share growth in the years ahead. Now let me hand it over to Pat Grismer, our CFO.

Thank you, David and good morning everyone. We’re pleased to report strong first quarter EPS growth for Yum! Brands led by outstanding performance at our China division. This combined with current trends and balance of year initiatives for all our divisions gives us confidence to reaffirm our full year guidance of at least 20% EPS growth excluding special items. We’re also continuing to make investments that position us well to drive double-digit earnings growth for many years to come. Today I’ll provide some additional perspective on our first quarter results and share our outlook for the second quarter and full year. I’ll then talk about what we’re doing to drive long-term value for our shareholders. For the first quarter we reported 24% EPS growth before special items. This increase was led by significant sales, margin and profit growth at our China division. We also have solid operating performance at our new KFC division. However, these results were partially offset by disappointing results at our new Pizza Hut division and at our Taco Bell division which was adversely effected by unusually severe weather in the U.S. Now I’d like to dig a little deeper into each division’s first quarter results. In China, operating profit increased by an impressive 80% prior to foreign currency translation. This performance was driven by same-store sales growth of 9% and nearly 7 points of restaurant margin improvement versus prior year. Given the challenges that we experienced in 2013, the single most important driver of a strong bounce back year for Yum! is continued sales improvement at our KFC business in China. With 11% same-store sales growth in the quarter it’s clear that we’re building momentum with this business and we’re pleased with the overall progress we’re making at KFC. Based on improving sales and the recovery we’ve seen in key consumer metrics at KFC we reaffirm our 2014 guidance of high single to low double-digit same-store sales growth for the China division. At Pizza Hut Casual Dining in China system sales grew 30% including unit growth of 23% and same-store sales growth of 8% for the quarter. We’re confident 2014 will be another outstanding year for this business as we continue to accelerate new unit development, expand breakfast into more and more cities and leverage our assets even further throughout the day. Now as pleased as we are with China sales I have to say we’re even more pleased with China’s restaurant margin topping 23% in the first quarter excluding an approximate half point negative impact of Little Sheep China division restaurant margin was actually slightly above what it was in the first quarter of 2012. This outstanding result reflects operating leverage from positive same-store sales, new pricing actions taken late last year and significant gains in restaurant productivity which further extend and build upon the efficiencies we realized in the second half of 2013. We continue to drive higher restaurant operating efficiency through improved store level sales forecasting, better labor scheduling and more effectively optimizing operating hours at selected locations. Importantly we’ve accomplished this while maintaining our high standards of customer service. I’d like to take this opportunity to congratulate and thank our China restaurant operations team for their breakthrough performance in achieving new levels of restaurant productivity. Shifting to development, we opened 123 new restaurants in China during the quarter including 68 KFC’s and 43 Pizza Hut Casual Dining restaurants. Over 70% of these new units were built in tier 3 through six cities where our unit economics and returns are strongest. So to summarize the progress we’re making in our China business. At KFC we continue to see sequential improvement in same-store sales growth and consumer brand attribute scores are essentially back to 2012 levels. Additionally, we delivered strong restaurant margins in the quarter and are seeing significant improvement in new unit performance. At Pizza Hut Casual Dining we continue to have strong same-store sales growth with AUDs higher than KFC and full year margins above 20% we’re generating two year cash payback. We’re aggressively investing behind this growth engine while also increasing our pace of development with Pizza Hut home service, which has compelling unit economics with a smaller investment. These results give us confidence that we’ll not only achieve our full year target of high single to low double-digit same-store sales growth for our China division but we’ll deliver significant full year margin improvement as well. Overall, we’re pleased with our progress and confident our China division will continue to be a major growth engine for Yum! Brands for many years to come. Now let me talk about our three new global brand divisions, starting with KFC. Our new KFC division includes all KFC units outside of our China and India divisions. To put this division in perspective KFC division contributed 29% of Yum! total operating profit in 2013, 91% of which was generated outside the U.S. Additionally as of the end of Q1 91% of KFC stores were franchised. For the quarter operating profit increased 4% excluding foreign currency translations. Operating profit growth was negatively impacted by 4 percentage points with the lap of one-time fees from a franchise ownership change in Malaysia in the first quarter of 2013. Excluding this item KFC’s operating profit grew a solid 8%. In the quarter KFC opened 80 new restaurants including 77 new international units. Our franchisees continued to lead the way with development opening 88% of these new units. As a reminder similar to previous years we expect our new unit development will ramp-up significantly as the year progresses. Same-store sales grew 1% in the quarter, these results were softer than we would have liked as weak performance in the U.S. and Thailand partially offset strong same-store sales performance in the UK, Russia, South Africa and the Middle East. In our international markets, same-store sales grew 3% in emerging markets and 1% in developed markets. In the United States same-store sales declined 3%. KFC operating margin was relatively flat versus prior year as the benefits of same-store sales growth and franchise development were offset by the prior year lap I mentioned, as well as a slight decline in Company restaurant margins. Moving to our new Pizza Hut division, which includes all Pizza Hut units outside of our China and India divisions. Pizza Hut division contributed 15% of Yum! total operating profit in 2013, 54% of which was generated in the U.S. Additionally 94% of Pizza Hut units were franchised as of the end of Q1. First quarter operating profit declined 14% versus prior year. Operating profit growth was adversely effected by 5 percentage points from the lap of a UK pension plan benefit realized last year. Excluding this one-time item Pizza Hut’s operating profit declined a disappointing 9%. Pizza Hut opened 69 new restaurants including 39 units opened outside the U.S., 87% of these new units were opened by our franchisees. Same-store sales declined 2% in the quarter driven by a 5% decline in the U.S. which accounts for about half of our Pizza Hut store base. For our international markets same-store sales grew 3% in emerging markets and 1% in developed markets comparable to KFC. Pizza Hut operating margin decreased approximately 6 percentage points for the quarter due impart to the decline in same-store sales and about a 4 percentage point drop in Company restaurant margin. Additionally about 2 percentage points of the operating margin decline was attributable to the pension overlap I mentioned previously. The restaurant margin decline was driven by sales deleverage and higher than expected commodity inflation in our U.S. business, where as I mentioned before the majority of our Company stores are located. We also made strategic investments in field level G&A to open new Pizza Hut markets and drive higher levels of development. As I’ll explain later we don’t expect first quarter results to be indicative of the Pizza Hut's performance balance of year. Moving to our new Taco Bell division, which includes all Taco Bell units outside of our China and India divisions. Taco Bell division contributed 21% of Yum! total operating profit in 2013, 97% of which was generated in the U.S. And as of the end of Q1, 85% of Taco Bell stores were franchised. Taco Bell’s reported results for the first quarter were clouded by a number of factors but we don’t expect these results to be at all representative of the full year results. First quarter operating profit declined 16% versus prior year with a same-store sales decline of 1% on the heels of eight consecutive quarters of same-store sales growth. We estimate that unusually severe U.S. weather impacted first quarter same-store sales by about 3 percentage point. Additionally, operating profit growth was negatively impacted by 5 percentage points due to a franchise incentive related to our national breakfast launch. While operating profit was impacted more than you’d expect on a 1% same-store sales decline, it’s important to note that our Company stores are more heavily concentrated in weather impacted geographies and thus underperformed to system average. In addition to the incremental sales deleverage restaurant margin was further impacted by a relatively high mix of labor-intensive and promotional products as well as higher than expected commodity inflation. This yielded about a 2.5 percentage point decline in restaurant margin for the quarter. We view this as a temporary phenomenon and expect second half performance to be much stronger than the first as innovation led sales growth, promotion led mix shift, and new pricing actions deliver improved margin performance balance of year. On the development front, Taco Bell opened 28 new restaurants in the quarter, and 27 of these new units opened by our franchisees. So, in summary for Yum! Brands, our 24% EPS growth for the first quarter was consistent with the guidance that we provided in February to be roughly in line with our full year EPS target of at least 20%. And while our Taco Bell and Pizza Hut results were softer than we would have liked, this was more than offset by strong performance in our China division. For the second quarter we expect EPS growth to be our highest of the year. Remember, in Q2 of last year, the KFC China poultry supply incident and news of avian flu weighed heavily on China division results making the second quarter our low point of the year from an EPS growth perspective. We’ll have the benefit of overlapping these weak results this year, combined with a tailwind from upward sales momentum at KFC in China and continued strength in China restaurant margins. We also expect a much better sales results from Taco Bell with our recent breakfast launch. However Q2 profit growth of Taco Bell will be moderate as commodity inflation will continue to pressure restaurant margins although not to the extent we saw in the first quarter. And finally we expect KFC to remain solid and Pizza Hut to show improvement in the second quarter. Now, before I talk about full year expectations, I want to provide some context for China restaurant margins and how we see this evolving balance of year. First, I want to caution you not to extrapolate our first quarter margin gain to the full year. Bear in mind that with respect to China restaurant margin, Q1 marks our easiest overlap of the year. Additionally, we began to implement new productivity measures during the second quarter of 2013, so we’ll begin to overlap some of those benefits this quarter. And finally we just launched an extensive menu revamp which will add some initial labor complexity including training cost and a slightly higher food cost mix. All that said, we’re confident in our ability to make significant full year margin gains in China. In addition to the labor efficiencies I’ve mentioned, we’ve continued to optimize operating hours at KFC and are seeing stronger new unit margins with the increasing weight of our development program towards lower tier cities and towards Pizza Hut Casual Dining. We also took about 3 points of pricing at KFC and 2 points of pricing at Pizza Hut Casual Dining late last year which should benefit the full year. At our December investor meeting, we indicated that China division margin would improve between 1 and 3 percentage points from 2013’s full year restaurant margin as about 15%. Based on our strong start to the year and each of the items I just mentioned, and with expected full year division, same-store sales in the high single to low double-digit range we’ve guided, I’m confident that China division’s restaurant margin will be at least 17% for the full year. So now let me share our expectations for the full year 2014, which as I mentioned last quarter, will look different from our ongoing growth model. This year we expect the growth rate for our China division to be significantly above its ongoing target of 15% this year, or about 40%. As sales at KFC China continue to improve, we expect China division restaurant margins will continue to benefit from operating leverage as well as from productivity initiatives and pricing. We also expect another strong year at Pizza Hut Casual Dining and on the development front we expect to open at least another 700 new units in 2014. Looking at our new brand divisions, we expect KFC’s growth rate to be above its ongoing target of 10%, Pizza Hut’s growth rate to be below its ongoing target of 8% and Taco Bell to be in line with its ongoing target of 6%, just as we mentioned in December. And while Taco Bell and Pizza Hut both had a slow start to the year, we expect Taco Bell to make this up in the balance of the year with a strong second half supported by breakfast, new product innovation, digital initiatives and additional pricing actions. However, it’s likely that Pizza Hut will trail our previous expectations although we do expect significant improvement from our first half as we sharpen our marketing, improve our digital execution and accelerate the pace of new unit development globally all enabled by our new global brand structure. When you add it all up, we expect at least 20% EPS growth in 2014. Now before we open up the call to questions, I’d like to talk about how we’re financially wired to generate strong returns for our shareholders. First with the strong and steadily growing cash flow that we generate from our global franchise business and from our high return equity businesses, we reinvest a substantial portion about 40% in new growth opportunities, largely new store openings. With the changes we’ve made to our store ownership profile over the years, there are a combination of new equity businesses and refranchising, these new stores are increasingly skewed to emerging markets which offer superior returns and significant growth potential thus laying a strong foundation for future earnings growth. Second, we pay a dividend which we’ve grown at a double-digit rate every year since we first paid a dividend over 9 years ago, making us one of only 10 companies in the S&P 500 to do so. This has delivered an annual dividend yield of about 2% which is very competitive for a Company with our growth profile. Third, we don’t hold cash, after covering our growth investments and dividends, we return all available cash to our shareholders in the form of share repurchases. Based on the track-record of our staff over the years, it’s fair to say that these buybacks have created enormous value for our shareholders. All three of these levers growth investment, growing dividend and value creating share repurchases work together to drive strong returns for our shareholders. So let me wrap things up. We’re pleased with our strong first quarter results, specifically at our China division. It’s evident, that the actions we took in 2013 to strengthen our business coupled with our ongoing growth investments have set us up for a strong bounce back in 2014. Looking at our three new global divisions, KFC is off to a solid start, Pizza Hut is in turnaround mode and Taco Bell’s year will be more of a first half, second half story as we continue to build momentum with this exciting brand. In addition, we continue to strengthen our position in high growth emerging markets, as we capitalize on the low levels of unit penetration and the growth of the emerging economies. I am confident in the strength of our business model and we’ll continue to make the investments necessary to sustain double-digit EPS growth over the long-term. And with that, we’ll be happy to take your questions.

(Operator Instructions) Your first question comes from Joseph Buckley with Bank of America. Your line is open.

Thank you. Pat, can I ask you to elaborate a little bit on the China margin comments. I mean effectively saying up at least 17%, you are staying within the high range of the prior 130 to 300 basis points improvement over 2013. So, kind of would you walk through some of the key elements, food cost inflation, labor inflation, may be what you saw on both of those in the first quarter, what you’re thinking for the second quarter and what you’re thinking for the balance of the year? Bank of America Merrill Lynch: Thank you. Pat, can I ask you to elaborate a little bit on the China margin comments. I mean effectively saying up at least 17%, you are staying within the high range of the prior 130 to 300 basis points improvement over 2013. So, kind of would you walk through some of the key elements, food cost inflation, labor inflation, may be what you saw on both of those in the first quarter, what you’re thinking for the second quarter and what you’re thinking for the balance of the year?

I am very happy to do that Joe. As a reminder, I mean our Q1 margin in China improved about 7 points, more improvement in KFC than in Pizza Hut but both improved. Same-store sales contributed about 6 points of margin improvement which included about 3 points from pricing with the balance from sales mix and transaction leverage. Importantly transaction, same-store transactions grew in both brands. We also got a 3 point margin benefit from restaurant level labor productivity and our new unit development program also improved our division margin by about a 1 point. So, when you add those up that’s about 10 points of margin benefit, offsetting that was about 2 points of pressure from inflation that included relatively flat commodities and about 7% inflation in labor and another margin point of pressure from Little Sheep and from rent. And so when you add those together that’s how you get to about 7 points improvement in the division. Now, as I mentioned we don’t want anyone to extrapolate that to the balance of the year, but based on everything we’ve outlined in terms of the ongoing momentum in our sales, the continued productivity initiatives, pricing actions that may happen balance of year plus what we know about the commodity outlook. We do expect to be at, at least 17% for the full year which is about 2 points better than last year’s full year results.

So, Pat, what are you expecting for commodities and waiver, I mean can you just describe here for the second quarter and then for the balance of the year? Bank of America Merrill Lynch: So, Pat, what are you expecting for commodities and waiver, I mean can you just describe here for the second quarter and then for the balance of the year?

Yes well, we do expect commodity inflation to edge up a bit. Our full year guidance is in line with what we communicated in New York, which is low single-digits. Labor, admittedly was a little bit light on inflation in the quarter at 7%. We still expect on a full year basis to be in the low double-digit. So we expect that labor inflation will nudge up over the course of the year.

Thanks, Joe. Joana next question please.

Your next question comes from Brian Bittner with Oppenheimer & Company. Your line is open.

Thank you. I’ve just got two questions, one on China and one on Taco Bell. For China, can you just talk a little bit more about the restage here, just the new menu in the marketing, between the higher cost of sales mix and the investment in training, first question is how many basis points, do you think this will be a headwind of margins versus what we saw on the first quarter? And also anything you can say on the sales reaction since the restage would also be helpful. Oppenheimer & Company: Thank you. I’ve just got two questions, one on China and one on Taco Bell. For China, can you just talk a little bit more about the restage here, just the new menu in the marketing, between the higher cost of sales mix and the investment in training, first question is how many basis points, do you think this will be a headwind of margins versus what we saw on the first quarter? And also anything you can say on the sales reaction since the restage would also be helpful.

So Brian, this is Steve. On the menu restage, it’s too early to tell exactly with precision what the impact will be on food cost, but we do expect it to be slightly higher based on our expected mix. And from a labor standpoint, I don’t think there will be a very material piece of increase in the labor line, but with any new product offering there will be labor training cost that will hit in the second quarter.

I think just from an overall marketing standpoint, we launched the new menu on the 26th. We began the national advertising on the 2nd. The overall objective is to restage KFC as even more youthful, more energetic and renovating along with the ever change that’s going on in China. The fact is that we launched 15 products simultaneously, that’s our first time we’ve have ever done that in KFC’s 27 year history and I don’t think anybody in the QSR industry has done that. We basically tried to steal a page out of the successful Pizza Hut playbook where we revamped the menu twice a year, 20% of the menu twice a year. And of the 15 products, 15 of the products are either new or they are returns of popular items that we’ve previously only offered like on a limited time-only basis. There are as I said in my remarks are four signature product platforms sandwiches, rice dishes, snacks, drinks and desserts. So we’re obviously increasing the amount of variety that’s offered at KFC. And while it’s early we’re pleased with the initial results. We’ve had great consumer feedback on our new roasted chicken burger, our teriyaki chicken flavored rice, flavored roast wings, we got a great drink that seems to be very popular, sparkling apple juice that people really are responding very favorably to. One of the things we’re trying to do this year is really take the offense and bring a lot of fun and excitement back to the KFC. Last year we were in the defensive position. And this year we’re really trying to bring fun and excitement. We’ve signed four very popular youthful celebrities. We got digital marketing and engagement and we’ve already had 7 million likes in the past three weeks. So we feel good about that. And this is a very holistic approach that we’re taking in the restage. If you walk into our restaurants today, you’re going to see new team members, with new contemporary uniforms that they really like. We’re rolling out new packaging. As we speak we have new menu boards. We’re adding Wi-Fi and at lot of our restaurants with the ultimate goal to have all of them, over 2,000 restaurants with Wi-Fi by the end of the year. And we’ve got digital mobile applications coming. So this is a holistic approach, we’re really trying to drive a lot of excitement, a lot of news behind the KFC brand. And I think just the fact that you get 7 million likes from your marketing now in three weeks. This shows how big and ubiquitous this brand really is, I mean people love the brand. As you guys all know, if you follow this, we’ve been ranked the number one brand in China for a number of years. And so that strength has never left us, and what we’re trying to do is just leverage it even more as we go into the future. So I’m very excited about KFC, the progress that we’re making, and the progress that we’ll continue to make.

Thanks, Brian. Joana next question please.

Your next question comes from David Tarantino with Robert W. Baird. Your line is open.

Hi, good morning. Another question on the China business, maybe more specifically, I think, you used the words upward momentum in the KFC business. I’m just wondering if you could give us maybe a directional update on what you’re seeing so far in Q2 in terms of the comp for either KFC or the division? Robert W. Baird: Hi, good morning. Another question on the China business, maybe more specifically, I think, you used the words upward momentum in the KFC business. I’m just wondering if you could give us maybe a directional update on what you’re seeing so far in Q2 in terms of the comp for either KFC or the division?

Yes David, we never really give out specific numbers as it relates to current trends. However, what we have conveyed is that we’re very encouraged by not only the results we saw in Q1, but how those results have sustained into Q2 and what we see to be the early response to the compounds every stage of the KFC brand. In my view comps don’t tell the whole story one of the things we look at is the absolute average -- we view seasonalized transaction volumes and what we see there are sequential improvements and it’s based on Q1 results and what we observed from current trends they give us the confidence to reaffirm our full year guidance for same-store sales growth of high single to low double-digit growth.

Great, that’s very helpful. And then may be another question on the margins it seems like you’ve gotten a lot of encouraging productivity enhancements and I’m just wondering where you are in the stage of that initiative whether you think you’ve gotten all that you’re going to get or if there is more on the table in terms of productivity gains? Robert W. Baird: Great, that’s very helpful. And then may be another question on the margins it seems like you’ve gotten a lot of encouraging productivity enhancements and I’m just wondering where you are in the stage of that initiative whether you think you’ve gotten all that you’re going to get or if there is more on the table in terms of productivity gains?

Well as I mentioned we started to initiate these productivity measures in the second quarter of last year so as we make our way into Q2 we’ve began to overlap some of those. However, we also think that our momentum on some newer productivity measures towards the end of last year and also continued into this year. So we expect that productivity will be a significant contributor to our full year margin performance although we wouldn’t extrapolate the gains from Q1 to the full year. But from a number of things so it’s not been any one thing that has driven that result we are much sharper in the way we’ve forecast sales at store level that puts us in a position to do a much better job of scheduling our labor so that we’re more efficient in a way that we deliver service to our customers. And we continue to rationalize operating hours at selected restaurants in ways that ensure that we’re growing profitable transactions increasing new profitable transactions all of this things really have come together to deliver what we consider to be an outstanding result and will help us achieve that at least 17% restaurant margin for the division this year.

Thank you. Robert W. Baird: Thank you.

The only thing I’d add on that is that the mindset we have in our Company is it’s always the unfinished business on the productivity gains and we’re going to -- we're constantly looking at every process in the ways to incrementally improvement it and hopefully make quantum lead for whatever we can. So we’re organized globally around operations best practice sharing I think anything that we pick up in any market that works we share with other markets and we expect to make continued progress on this front.

Thanks David. Next question please Joana.

Your next question comes from David Palmer with RBC Capital Markets. Your line is open.

This is Eric Larson for Dave Palmer, just want to ask you two quick questions here. You’ve got a new menu in marketing in the Taco Bell and Pizza Hut which is likely to impact the second quarter. Are you seeing an acceleration in any of these divisions lately, any numbers or additional color on how these initiatives would be pretty helpful. And then also would like to ask you about your repurchase plans and targeted leverage in the near-term? Thanks. RBC Capital Markets: This is Eric Larson for Dave Palmer, just want to ask you two quick questions here. You’ve got a new menu in marketing in the Taco Bell and Pizza Hut which is likely to impact the second quarter. Are you seeing an acceleration in any of these divisions lately, any numbers or additional color on how these initiatives would be pretty helpful. And then also would like to ask you about your repurchase plans and targeted leverage in the near-term? Thanks.

Well, I think on the Taco Bell point as you know we just launched breakfast we’re very pleased with the initial results it’s too early to really go in the details on that. At Pizza Hut we’ve recently launched Garlic Parmesan Pizzas and WingStreet and we’re pleased with the results that we’ve had out of both those products. But I can’t really give you any specifics on the actual sales trends.

And then on the financial structure question with respect to the purchases consistent with what we outlined in New York we expect share repurchases to contribute about a 1 point of EPS growth so we’re still on-track to do that. And then as it relates to our capital structure we’re happy with where we’re at how we’re positioned from a leverage perspective and as you know we completed a successful refinancing of about $600 million of debt in the fourth quarter of last year which we believe created significant value for our shareholders so we’re happy with way things stand on a capital structure basis. This is something we continue to look at and we believe that we’re in the sweet spot.

Thanks Eric. Joana next question please.

Yes. Your next question comes from Jeff Farmer. Your line is open.

Just touching on Taco Bell breakfast again in a little bit different angle here so I am just curious what you have learned about your Taco Bell breakfast customer over more of the extended test period. So are these existing customers coming into the restaurant are they increasing your frequency or again are you tracking new customers altogether and does a breakfast visit from a Taco Bell customer some of these really loyal do you see them essentially doubling down coming to the restaurant twice on some occasions how should we think about that Taco Bell customer and breakfast? Wells Fargo Securities: Just touching on Taco Bell breakfast again in a little bit different angle here so I am just curious what you have learned about your Taco Bell breakfast customer over more of the extended test period. So are these existing customers coming into the restaurant are they increasing your frequency or again are you tracking new customers altogether and does a breakfast visit from a Taco Bell customer some of these really loyal do you see them essentially doubling down coming to the restaurant twice on some occasions how should we think about that Taco Bell customer and breakfast?

Well first of all on the test markets and what we’ve seen to-date the business is incremental okay so it’s entering the incremental usage. Now the great thing about Taco Bell is that Taco Bell users are heavy breakfast users, I think they compose a 75% of the heavy breakfast users it’s an amazing number. So just getting people converted into Taco Bell users to breakfast for a new different incremental occasion that’s really our closest in opportunity, I was just in Phoenix a couple of weeks ago where we’ve been in test for two years and what was startling to me was how many people didn’t know we were in breakfast until we launched our new advertising. So I think what we learned in the last couple of years is we can get a profitable proposition but it’s really going to challenging to break through the clutter and get people to be aware of your breakfast offerings and get them to try. We think we’ve really done that with the recent advertising which is very talked about and when I was talking to customers they were saying that they’ve seen the advertising and enjoyed it and they came in and tried it. And I think the good news we feel the things that were most and we learned this from test markets and also with the launch people love our products. I think we’ve got, if you look at the A.M. Crunchwrap it’s very portable, it’s the most portable breakfast product in the category, and it’s been tested up against of a like product with competition and we win with better value, the waffle taco, is similar. I mean there is nothing like a waffle taco, it’s a novelty product in the sense that it is just so interesting, if you just go online people are talking about both of the A.M. Crunchwrap. And the Cinnabon Delights, I don’t think you can eat just one. I mean these things are great. And we’ve developed, one of the things we’ve realized we needed to have in breakfast in test markets we need to have a good coffee line of products. And we’ve had great coffee with flavored options which people really like. And we think that that segment will grow overtime. The good thing is, is that our franchisees are very excited about this. They are excited about in Phoenix I was in Columbia and Missouri just last week, I was meeting with our franchisees they have 17 stores, they were I think actually doubting Thomas is a breakfast. But I think they have been converted because the people really liked the products. So you have products, good value, minimum investment. Remember we were able to do this with the significant capital expenditures. So we think we’re off and running, we want to emphasize that we know this is not lay down. I mean I just could talk about in fact we were in Phoenix, when I was in Phoenix and we’ve been there for two years and people didn’t even know until we announced we have already achieved breakeven and you are at a solid breakfast platform to go forward with, but customers didn’t know about it. So we got to break major habits, I mean people have a tendency to do the same thing every day and so we got to -- it's hard to even to get our current users to give this a try. But I think the team is doing a very innovative and exciting ways from a marketing standpoint. We actually train for breakfast. We did more training for the breakfast roll out than anything was ever done from an operational standpoint. We had rallies all around the United States, the team’s pumped up. We’re not in it to be in breakfast, we’re in to win a breakfast. And we’re going to -- we have great products today that have gotten us into the game, we have a lot more products that we can go to and when we want to, that are derivatives to what we’ve done plus some new products. So early days I don’t want to get too excited about it, okay because we know the challenges is immense but I have always said that we can be successful if breakfast and we fully intend to be, there is no reason in the world why Taco Bell can’t go from 5,000 stores to 8,000 stores in the United States. So our goal is to add that $100,000 plus concept layer that really takes already a high returning business to a whole different level and we get much more rapid new unit development. This year we’ll have over 100 net new units at Taco Bell on top of I think around 80 last year. So we’re picking up speed, the development pipeline is getting better and the enthusiasm is very high on this, but the proof is still in the pudding.

Thanks Jeff. Next question please Joana.

Yes. Your next question comes from John Ivankoe with JPMorgan. Your line is open.

Hi, thanks. I’d like to take the opportunity to ask two questions if I may. First philosophically when you look at China margins, it does look like labor hours per store was actually down in the first quarter and that’s despite the higher traffic that you say at the brand, and cost of goods sold was the lowest I could find. I mean at least back 10 years maybe even more than that in the division. So, in kind of the context of having a recovery and trying to do a better job for your customer and the employee, is there any thought of reinvesting some of that margin in giving a better store level experience or does it, kind of what we saw in the first quarter in letting the store level economics really earn, is that the right thing for you guys to pursue over the next couple of years? And I ask that of course in the context of getting back to a 20% margin which I think was your long-term goal a few years ago. JPMorgan: Hi, thanks. I’d like to take the opportunity to ask two questions if I may. First philosophically when you look at China margins, it does look like labor hours per store was actually down in the first quarter and that’s despite the higher traffic that you say at the brand, and cost of goods sold was the lowest I could find. I mean at least back 10 years maybe even more than that in the division. So, in kind of the context of having a recovery and trying to do a better job for your customer and the employee, is there any thought of reinvesting some of that margin in giving a better store level experience or does it, kind of what we saw in the first quarter in letting the store level economics really earn, is that the right thing for you guys to pursue over the next couple of years? And I ask that of course in the context of getting back to a 20% margin which I think was your long-term goal a few years ago.

Well we fully expect to overtime to get back to that 20% margin that’s the goal. And we think we’re going to get there primarily through sales leverage. As we take the sales up we think that’ll be the number one beneficiary. The one thing that we believe more than anything is and we’ve done this from day one in China is we will never sacrifice the customer experience for any kind of margin. That’s just not going to happen. I mean we in the last four months, we’ve retrained every one of our team members on our standards okay on our expectations on what we’re doing. We’re investing in the consumer proposition and our customer majors all say that we’ve been able to do it quite successfully. And the magic of this business is the magic at the end. You want to get the sales growth you want to get to margin growth. And that’s what I think they are demonstrating we have the capability to do there, but make no mistake about it. The primary thing we have to do is make our customers happy. I mean we got to make our customers happy and bring them back again and again and again. One of the things we train people on John is a branded experience. And let me give you an example of that, when you -- what we’re focused on is branded service in China. And this is part of the restage and I didn’t talk about it, but I’m glad you bring it up because it does have operational implications and we’ve taken the time to train everybody on this. So when you walk into store in China everybody raises their hands. Automatically and says nǐ hǎo. Okay. You’re welcomed as a customer. We’ve learned that one of the things we want to do is we want to make our customers feel valued, so when we take the money from and give the money back to our customers we give it them with two hands. Okay. That’s just a recent thing that we just added because we want to help people and we thank people for coming and just like they do at Chick-fil-A. It’s been a pleasure serving you. We actually picked that up from Chick-fil-A here in the United States. We built that into our brand of service experience. So those are just two things that we’re trying to do every single time so that the customer feels it, so I think the big to think about are restage is that this is a -- we look at everything we do to make it better for the customer more product variety more better uniform, better environment through the things Wi-Fi. We’re also this year we’ll be consistently upgrading our restaurants in a number of stores in major cities and showing designs that we’ve created. So the only way you enter a long-term and the short-term obviously is you’ve got to make customers happy. And we’re on just a mission to do that. So I think we are investing. I know we’re investing in the customer proposition.

Specifically to get at your question around what was happening with cost of sales when you look at the year-over-year decline. You may recall that last year in the wake of the challenges we experienced at the end of 2012, we introduced some value offers, some discount offers in an effort to stimulate traffic. So we’re laughing perhaps this year. Also as I mentioned, we took some new pricing actions at the end of 2013 after going without pricing at KFC for over a year. And we thought that we’re going to do that based on the recovery that we saw in the key consumer metrics and good news is at end of the first quarter, our value scores continue to be very good and we’ve maintained our pricing on the value anchors which are critical to maintaining a strong value position with consumers.

And of course I’m not sure you do appreciate the question, but when you look at record gross margins and declining labor hours per store you at least have to ask a question whether in fact that customer value position is going up and if you say it is, it is? JPMorgan: And of course I’m not sure you do appreciate the question, but when you look at record gross margins and declining labor hours per store you at least have to ask a question whether in fact that customer value position is going up and if you say it is, it is?

I’ve always appreciated your knowledge as a category, John.

No. Thank you, David. And secondly, if I may -- on your KFC and thank you for the transparency it’s great. I mean I’d love to see it, but when you look at the Company store margins there and especially with the majority of Company stores outside of the United States, could you give -- is there is a different experience that the Company stores are seeing in KFC versus for example the franchisees and obviously you don’t pay a royalty in those Company stores for KFC, so are the franchisees seeing different economics on the margin side as those franchisees grow because I don’t think you’d be growing many KFC stores with the margins in the low double-digits? JPMorgan: No. Thank you, David. And secondly, if I may -- on your KFC and thank you for the transparency it’s great. I mean I’d love to see it, but when you look at the Company store margins there and especially with the majority of Company stores outside of the United States, could you give -- is there is a different experience that the Company stores are seeing in KFC versus for example the franchisees and obviously you don’t pay a royalty in those Company stores for KFC, so are the franchisees seeing different economics on the margin side as those franchisees grow because I don’t think you’d be growing many KFC stores with the margins in the low double-digits?

John, this is Steve the economics still remains strong and in fact the comment we actually took our international build number up and that’s the number that’s both for KFC and for Pizza Hut from our initial guidance. So, their economics are strong and we continue to expect strong development. I’m sorry, John. Bear in mind what you’re seeing is a global average, right. And there are differences in the profitability of new units and emerging versus developed markets and where more of our growth is coming from is in the emerging markets where the unit development is stronger, where the unit returns are strong.

And if you’ve done this before, I apologize, but can you quantify that difference of the kind of the growth markets versus the established markets? JPMorgan: And if you’ve done this before, I apologize, but can you quantify that difference of the kind of the growth markets versus the established markets?

And we’ve talked about paybacks before especially in some emerging markets and they’re very attractive. There are very attractive returns if they weren’t the franchisees would be growing.

I understand. Thank you so much for the time. JPMorgan: I understand. Thank you so much for the time.

Thanks, John. Next question please, Joana?

Remember we’re going to have across the board we’ll have record levels of development this year, 150 international units outside of China and that only comes if you have -- remember 90% of what we outside of China is franchise-owned. So they’re only going to invest if they’re going to be getting good returns. And I think the important point is that the margins that you see that there are low are primarily in the developed markets and the emerging markets we get cash-on-cash returns within two to four years. Okay.

Next question please, Joana?

Your next question comes from Keith Siegner with UBS. Your line is open.

Well, thank you. I’d like to follow-up on the KFC China restaging and I appreciate the focus on being more youthful and energetic in the 15 new products, but to ask you slightly differently, is this restaging in these new products, is this outright menu extension, is it more premium focused more value, is there any change in the main part focus any color on that and I guess Pat what I’d ask you is, do you expect any mix impact from this restaging on how your same-store sales develops throughout the year? Thanks. UBS Capital Markets: Well, thank you. I’d like to follow-up on the KFC China restaging and I appreciate the focus on being more youthful and energetic in the 15 new products, but to ask you slightly differently, is this restaging in these new products, is this outright menu extension, is it more premium focused more value, is there any change in the main part focus any color on that and I guess Pat what I’d ask you is, do you expect any mix impact from this restaging on how your same-store sales develops throughout the year? Thanks.

I think that first of all these products are more premium in nature they’re not value products, so they’re high quality premium priced products. Okay. We now have I think have 66 total options at KFC compared to 59 that we had before. We removed 7 items updated 1 and we increased. And so I think we tried to optimize our menu, but the product themselves are more premium in nature and one of the things we’re doing in China is we want to add entry price points, they are very value oriented and effective with lunch and dinner, okay. So, that RMB 6 breakfast, we will have some RMB 6 breakfast, we’ll have some RMB 15 lunches and then so we have the entry price point but we want to obviously you want to give people, you want to trade people up as much as you can in the higher quality products and that’s really what our focus is. We’re really going for quality transactions.

And Keith to your follow-on question regarding the impact that the new menu could have to our margin, it’s early days but we expect that as we mentioned before that it will drive some or put some pressure on the food cost and labor but not to an extent that it’s going to change our strong outlook for margin improvement balance of year. And in fact we expect the sales leverage coming from the promotion combined with the ongoing productivity initiatives to really dominate the margin story for the year.

And Pat as far as the mix impacts are in terms of same-store sales, I mean it sounds like especially given that this is premium besides from the margin impact, it does sound like there could be positive mix benefit from this as… UBS Capital Markets: And Pat as far as the mix impacts are in terms of same-store sales, I mean it sounds like especially given that this is premium besides from the margin impact, it does sound like there could be positive mix benefit from this as…

I mean from a check, average check perspective?

Exactly. UBS Capital Markets: Exactly.

Yes. But as we mentioned, we maintained the strong value offer on the menu as well, so it’s not, although we are moving away from value, I think it’s the power of doing both.

Thank you. UBS Capital Markets: Thank you.

Thanks, Keith.

Next question please Joana.

And your next question comes from Sara Senatore from Sanford Bernstein. Your line is open.

Thank you very much. I just wanted to ask a follow-up question about Taco Bell, I mean it looked like in the first quarter, you talk about promotional spend and franchisee incentive. Can you talk about kind of whether or not in light of the -- whether or not that was processes through the year and how successful breakfast needs to be for you to be able to hit your kind of ongoing growth algorithm, and I know you talked about $100,000 was kind of the incremental sales layer but I am just trying to figure out this year what the puts and takes there are on the margin with respect to breakfast? And then I also had a quick follow-up question, outside of Taco Bell, if I look at the margin for Pizza Hut and KFC globally recognizing that there were some one-times. I think in the past you said that there is an opportunity there when those were reported as part of YRI to get company operated margin may be a lot higher. Is that still the case? Sanford Bernstein: Thank you very much. I just wanted to ask a follow-up question about Taco Bell, I mean it looked like in the first quarter, you talk about promotional spend and franchisee incentive. Can you talk about kind of whether or not in light of the -- whether or not that was processes through the year and how successful breakfast needs to be for you to be able to hit your kind of ongoing growth algorithm, and I know you talked about $100,000 was kind of the incremental sales layer but I am just trying to figure out this year what the puts and takes there are on the margin with respect to breakfast? And then I also had a quick follow-up question, outside of Taco Bell, if I look at the margin for Pizza Hut and KFC globally recognizing that there were some one-times. I think in the past you said that there is an opportunity there when those were reported as part of YRI to get company operated margin may be a lot higher. Is that still the case?

Let’s deal with the Taco Bell question first, Sara. With respect to our expectations around breakfast and what we’re seeing today, we’ve been targeting mid to high single-digit mix for breakfast that’s generally what we saw in the test. And to David’s point earlier that was highly incremental and that’s probably what we’re seeing in the early days of the launch in breakfast. How it’s going to impact our margin, so that’s the sales piece and so if we achieve and we maintain that mid to high single-digit mix for breakfast that’s what we need to deliver our same-store sales growth targets for the year. In terms of the margin piece, the breakfast offer at that mix level is slightly dilutive to margin but only slightly. For us, this is an opportunity to establish an entirely day part that is highly incremental that as it builds overtime it’s going to be overall accretive to our margins. And therefore as David pointed out earlier, will put us in the position to accelerate the pace of new unit development.

Understood. And then on Pizza Hut and KFC. Sanford Bernstein: Understood. And then on Pizza Hut and KFC.

Well I think the important thing to keep in mind is that in those businesses in the U.S. we have very low levels of Company ownership even internationally. So, franchise development dominates those two brands particularly in emerging markets, we do expect overtime to see those margins improve particularly as our Company store base is increasingly skewed to those emerging markets which offer the benefit of better restaurant level economics with lower labor and lower rent. So, overtime as we pick up the pace of development with the Company stores and emerging markets and those form a higher proportion of our total equity store base, we continue to target margins for KFC and for Pizza Hut, so it will take us into the mid-teen territory.

Thank you. Sanford Bernstein: Thank you.

Thanks, Sara. Next question please Joana.

Your next question comes from Jason West with Deutsche Bank. Your line is open.

Yes, thanks guys. Just on the China recovery and particularly KFC, the 11 comp in the quarter, can you talk about kind of how that looks within the two tier groups that you look at, were you are seeing similar recovery in tier 1 and 2 versus 3 to 6 and just overall thoughts on as -- it looks like your brand score is back to normal but the comps on the two year is still pretty negative. Just to -- why the big discrepancy there between the recovery and where the brand scores are? Thanks. Deutsche Bank: Yes, thanks guys. Just on the China recovery and particularly KFC, the 11 comp in the quarter, can you talk about kind of how that looks within the two tier groups that you look at, were you are seeing similar recovery in tier 1 and 2 versus 3 to 6 and just overall thoughts on as -- it looks like your brand score is back to normal but the comps on the two year is still pretty negative. Just to -- why the big discrepancy there between the recovery and where the brand scores are? Thanks.

Yes certainly, Jason. On the sales side city tier, there was modest variability in KFC same-store sales growth across the city tiers with the results strongest in tier 1 cities particularly Shanghai because you will remember that’s where we experienced the steepest sales declines in the first quarter of 2013. So, there was a stronger lapping benefit if you will, in tier 1 cities Shanghai in particular. So, there was modest variability there not so much on the Pizza Hut side. And then in terms of the two year comps, as I mentioned before, I don’t know that the comps tell the whole story. They become difficult to read, based on the variable lap of the two and three year comps and so forth. We have looked at both. But what I really hang my head on is absolute transaction volumes on a de-seasonalized basis. And this is something that we study, from month-to-month, to really see how we are tracking with our business. And what we’re seeing is continued improvement and upward momentum in that measure. That’s what gives me confidence along with the consumer metrics, that the business is steadily recovering. And overall we’re pleased with where we are at and the progress we’re making, again not only in sales, but importantly the profitability of the sales and how they work together to deliver the bounce back in operating profit. Our goal this year is to get to that high to single to low double-digit same-store sales growth and about 40% operating profit growth in our China division. And frankly we don’t need heroic same-store sales here in China that -- high single to low double-digit growth is fine. What we want to do is to do is put forward -- get our business back on the right footing, get more consumer excitement back, and we prefer to grow on solid controlled manner this year, and then build off the space. So we’re basically focused on building the business, the right way for the long-term. And I think we are making continual improvement with KFC and I think we’re basically on-track.

Thank you, Jason. Joana next question please.

Your next question comes from John Glass with Morgan Stanley. Your line is open.

Hi, this is Jake Bartlett on for John. I have a quick question on COGS, and you levered it more than we would have expected with the pricing that you had in the flat inflation. Was it just lapping discounting of last year? And then on those, along that line, going forward do you expect this kind of benefiting in the quarters going forward or should we just kind of as a normal interplay between pricing in our inflation expectations? Morgan Stanley: Hi, this is Jake Bartlett on for John. I have a quick question on COGS, and you levered it more than we would have expected with the pricing that you had in the flat inflation. Was it just lapping discounting of last year? And then on those, along that line, going forward do you expect this kind of benefiting in the quarters going forward or should we just kind of as a normal interplay between pricing in our inflation expectations?

Jake, in future quarters we would expect to return to a more normal pattern. So Q1 was unusual as I mentioned because we had some pretty extreme discount offers in Q1 of last year in effort to stimulate transactions that we’re getting a lapping benefit and so we saw average spend grow, from that more than we would expect in a normal quarter. On top of the fact, as you mentioned, that we had the new pricing actions come into a quarter where food inflation was flat.

So it’s not about an ongoing say theoretical food cost system, or some sort of productivity gains here, or just efficiency gains here your achieving at the food cost level? Morgan Stanley: So it’s not about an ongoing say theoretical food cost system, or some sort of productivity gains here, or just efficiency gains here your achieving at the food cost level?

No.

And then, in terms of the restage, you mentioned customer experience. Is that involving a re-image of source, can you just remind us? Morgan Stanley: And then, in terms of the restage, you mentioned customer experience. Is that involving a re-image of source, can you just remind us?

Well I think we’re building off a powerful image, the number one brand in China, all we’re basically doing is trying to invigorate it and show and demonstrate that we’re…

I meant remodels, some sort of a remodel program in China? Morgan Stanley: I meant remodels, some sort of a remodel program in China?

Okay. We just we constantly remodel every 5 to 7 years; that we just have new designs that we’ll be rolling out this year.

Got you. Morgan Stanley: Got you.

Thank you. Joana next question please.

Okay. Your next question comes from Jeffrey Bernstein with Barclays. Your line is open.

Hi, good thanks guys. This is Erwin on for Jeff. Just really quickly on the China consumers, or let’s say is confidence in sentiment, are you seeing any changes in the consumer willingness to dine out or maybe in their habits in anyway, I mean also on the broader industry sales versus KFC, that you still see yourself lagging, because of the supply issue or have you kind of regained the lost kind of some of the losses and kind of brought yourself more in line with the category even outperforming? Thanks.

Well, certainly on a reported basis, given the strong bounce back in Q1 helped by the last year, we’re outperforming the category from a quarterly growth perspective. I would say that the macro situation hasn’t been changed versus last year. It continues to grow overall. And I think when you look at the fact that we had good, very solid results with our Pizza Hut Casual Dining business, that’s a further indication that when you have a concept that is well-positioned and well executed, consumers are going to come. So we’re delighted with the results that we’re getting and as we said we see the China business to be an important one for us for the long run. And even though 7% growth in GDP is lower than it was in recent years. It remains the fastest growing a large economy in the world, and we’ve got a leading position there, so we’re very happy with that.

Thank you. Joana next question please.

Your next question comes from Andy Barish with Jefferies. Your line is open.

Hey guys, just wondering about the food inflation, commodity inflation uptick in the U.S. business looked noticeable obviously in Taco Bell which is predominantly domestic. Can you give us some thoughts on that, and then your pricing actions for later this year in terms of the scope of that, and was that initially anticipated or sort of a reaction to some of this commodity ramp? Jefferies: Hey guys, just wondering about the food inflation, commodity inflation uptick in the U.S. business looked noticeable obviously in Taco Bell which is predominantly domestic. Can you give us some thoughts on that, and then your pricing actions for later this year in terms of the scope of that, and was that initially anticipated or sort of a reaction to some of this commodity ramp?

Well, there is no doubt that commodities have played out very differently from what we thought. In New York you’ll recall, we came into the year expecting 4% inflation in meat and 4% deflation in cheese. Things could not have played out any differently as we’re expecting low to mid double-digit inflation in beef, it was up high single-digit in the first quarter. And then for cheese, we’re expecting now mid single-digit inflation it was up over 20% in the first quarter. So, it has played out very differently and so yes that has played into our pricing actions this year. And that we intend to do balance of year but this is one of the things where we continue to read the business in terms of how consumers are responding to our value offers and to our new product innovation and the progress we continue to make on productivity initiatives and then we determine what we need to do by way of pricing in order to maintain and improve margin so that we have a strong investible position that is going to underwrite future unit growth. So, yes, the commodity situation in the U.S. is proving to be a challenging one but we’re dealing with it just as we have for the last 50 years.

Thanks, Andy. Next question please Joana.

Your next question comes from Diane Geissler with CLSA. Your line is open.

Good morning. CLSA: Good morning.

Good morning.

I wanted to ask you about opportunities on re-franchising just where you stand I think there is still some opportunity on the Taco Bell side? And then when you look at the China market overall where do you see yourself basically three to five years from now in terms of do you see more franchising chance to refranchise there particularly as that market matures and you get bigger in India for instance or do you still see a company-owned operating model in China over the longer time? CLSA: I wanted to ask you about opportunities on re-franchising just where you stand I think there is still some opportunity on the Taco Bell side? And then when you look at the China market overall where do you see yourself basically three to five years from now in terms of do you see more franchising chance to refranchise there particularly as that market matures and you get bigger in India for instance or do you still see a company-owned operating model in China over the longer time?

The philosophy we’ve always had is to earn the right to own. And wherever we own stores we’ve earned the right to own with the exceptions in some markets and countries where we own a few stores just so we can lead for test markets. But if you take a look at Taco Bell, we’ve actually reduced our ownership in Taco Bell with past few years and now it’s about 15% where the Taco Bell has margins that end of last year close to 20% these are clearly the shareholder benefits by some of those restaurants. So that’s the mentality that we have. We look at all of our equity on a constant basis and make sure that the investing we’re making in terms of running the store well exceeds our cost of capital.

And specifically to the businesses as you mentioned Diane in the Taco Bell 15% that’s our target, so there isn’t more refranchising opportunity that we see there and we’re generally happy with the returns we’re getting on those new investments and we believe it’s a strong equity position for us. And as far as China is concerned, we have been doing some modest amount of refranchising for the last several years. We see that continuing so we expect that we’ll continue to maintain that ownership percentage to David’s point though under the banner of earning the right to own given extraordinary returns we’re seeing on new unit development with our KFC and Pizza Hut and coming up now Pizza Hut home service, we think it’s a great place to own and operate restaurants. It creates enormous value for our shareholders. But we see China being predominantly equity for many years to come although we’re looking very aggressively at franchising as a way to accelerate even more growth as we go forward. Diane Geissler - CLSA: That’s terrific. Thank you.

Thanks Diane. Next question please Joana.

Your next question comes from R. J. Hottovy with Morningstar. Your line is open. R. J. Hottovy: Yes thanks. Just wanted to drill down a little bit more into the takeaway some in global brand strategic reviews. More specifically discussing KFC and your ability to take the learnings from the successful developed markets like the UK and Australia and apply them to North America. One, what type of initiatives do you have planned; and two, how do you plan to communicate those to the franchisees? Thanks. Morningstar: Yes thanks. Just wanted to drill down a little bit more into the takeaway some in global brand strategic reviews. More specifically discussing KFC and your ability to take the learnings from the successful developed markets like the UK and Australia and apply them to North America. One, what type of initiatives do you have planned; and two, how do you plan to communicate those to the franchisees? Thanks.

Well, I think what we -- when you look at the UK business and the Australia business KFC in particular you’ve got two very successful businesses that are more in the portable food arena particularly with sandwiches. So we’re looking at how we can take some of those learnings and develop a right sandwich platform and be effective in the United States and in that arena as well. I think we constantly share product news that travels, so any new product that is developed in Australia or the UK would move to the U.S. one of the things for example is boxed meals were successful in Australia and we’ve moved them into the U.S. trying to target a $5 price point. And I think when we were organized separately the U.S. teams didn’t really work as closely with the international teams as we’d like and we’re going to see a lot more sharing and I think adoption with those teams together now reporting in the separate or focused CEOs.

Thank, R. J. I think we have one final question, Joana.

Your last question comes from Peter Saleh with Telsey Advisory Group. Your line is open.

Great. Thank you. I just wanted to come back to Taco Bell breakfast I think you’d mentioned $100,000 incremental layer from the breakfast just curious in test how long did that take for the franchisees to kind of get to that breakeven level? Telsey Advisory Group: Great. Thank you. I just wanted to come back to Taco Bell breakfast I think you’d mentioned $100,000 incremental layer from the breakfast just curious in test how long did that take for the franchisees to kind of get to that breakeven level?

Well as you know we’ve been developing our breakfast layer for a number of years. Evolving the menu to understand what is going to resonate most with consumers and be perceived as a highly differentiated offering. So we’ve made a number of changes to the menu over that period over that period of time and it’s been with this most recent offering that’s been an active development and test for the last call it 18 to 24 months that we’ve seen the best results that have now given us the confidence to go national. And as we mentioned it was in the those tests that we achieved the mid to high single-digit mix that we needed in order to make the economics work for us and we’re very pleased and encouraged by the early results we’re seeing from the program which are generally in line with what we saw in test.

Great, thank you very much. Telsey Advisory Group: Great, thank you very much.

Thanks Peter.

Okay let me just wrap-up. I think we’re confident we’re going to have a strong bounce back year in 2014. And we’re going to grow our earnings per share at least 20% and we look forward to reestablishing our track-record of consistently delivering double-digit EPS growth in the years ahead. As we go into the balance of the year, we have significant building blocks in place in China in each of our divisions that we think will help us have very sold year. Thank you very much.

Thanks everyone for joining the call.

This concludes today’s conference call. You may now disconnect.