Tim Jerzyk - Senior Vice President, Investor Relations/Treasurer David Novak - Chairman of the Board, President, Chief Executive Officer Richard T. Carucci - Chief Financial Officer

David Palmer - UBS Jeffrey Bernstein - Lehman Brothers Glen Petraglia - Citigroup Jeffrey Omohundro - Wachovia Howard Penney - Friedman, Billings, Ramsay & Co. Rachael Rothman - Merrill Lynch Steven Kron - Goldman Sachs Virginia Chandler - J.P. Morgan Joe Buckley - Bear Stearns Mitchell J. Speiser - Telsey Advisory Group Jason West - Deutsche Bank

Good morning. My name is Luanne and I will be your conference operator today. At this time, I would like to welcome everyone to the Yum! Brands fourth quarter earnings conference call. (Operator Instructions) I will now turn the call over to Mr. Tim Jerzyk. Sir, you may begin your conference.

Thanks, Luanne and good morning, everyone and thanks for joining us on our call this morning. The call is being recorded and will be available for playback. We are broadcasting the conference call via our website, www.yum.com. Please be advised that if you ask a question it will be included in both our live conference and in any future use of this recording. I would also like to advise that this conference call includes forward-looking statements that reflect management’s expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information in this conference call related to projections or other forward-looking statements may be relied on subject to the Safe Harbor statement included in our earnings release last night and may continue to be used while this call remains in the active portion of the company’s website, www.yum.com. On our call today, you will hear from David Novak, Chairman and CEO, and Rick Carucci, our CFO. Before I turn the call over to David, I want to remind you that our first quarter earnings release will be April 22, 2008, which is a Tuesday after the close. And then another reminder, a save-the-date reminder, Monday and Tuesday May 5th and 6th here in Louisville we will host analysts and investors for a conference about all of our businesses. It will be a comprehensive update. Save the date. We’ll look forward to you being here. Now I would like to turn the call over to David Novak, our Chairman and CEO.

Thank you, Tim and good morning, everybody. With all the negative business headlines I’ve been reading lately, I can’t tell you how happy I am to be in a position to share some really good news, which is that Yum! Brands has continued to differentiate itself from other restaurant companies by delivering consistently strong results. Led by the strength of our global portfolio of category leading brands, we reported full-year EPS growth of 15% for 2007, up from our previous estimate of 13%, continuing to build on our track record of success. This marks our sixth consecutive year of achieving double-digit EPS growth, meeting our shareholder commitment of at least 10%. We also ended the year with significant core business momentum while making good investments for the long term. I am especially pleased with the outstanding positive momentum of our international and China business. China delivered an exceptionally strong finish to the year with fourth quarter operating profit up 44% on a reported basis, despite well-publicized record high commodity inflation. This is a phenomenal result and speaks to the power of our superior brand positioning and execution in China. Equally, our Yum! Restaurants International business, or YRI, continues to impress, achieving fourth quarter system sales growth of 9% on a constant currency basis. A key driver of this performance was record level development of 852 new restaurants in 2007 which, when combined with the opening of 506 new units in our China division last year, makes this the number one retail developer outside the United States. Our global powerhouse status not only explains our strong results in 2007 but positions us well to drive consistent growth going forward. Importantly, while the U.S. was weak, we are also confident momentum is building. All of this is leading to even more good news, which is that we are revising our previous 2008 earnings per share guidance upward to $1.85, reaffirming our annual commitment to deliver EPS growth of at least 10%. Now 2008 will also be filled with major one-time benefits that are not included in our full year guidance. Rick will put the one-timers into perspective with his comments but for those of you who can’t wait, the $1.85 does not include an estimated $0.06 of one-timers which takes us to $1.91 of reported EPS. We know the importance of consistency when it comes to investment performance so we have constructed our business model to deliver this level of consistency year after year. We believe we can continue to build on our track record of success, given the strength of our global brands and the breadth of our global presence. And with our ability to use the significant operating cash we generate around the world to fund high return investments, we are even more confident in our ability to grow shareholder value. As I talk about each of our businesses, I’d like to do so in the context of our four key growth strategies -- number one, build leading brands in China in every significant category; next, drive aggressive international expansion and build strong brands everywhere; third, dramatically improve U.S. brand positions, consistency, and returns -- and believe me, we are very convicted to do that; and four, drive industry-leading, long-term shareholder and franchisee value. So I’ll start with China, where we are well on our way to building leading brands in every significant category. 2007 was an exceptionally good year for us in China and we expect another outstanding year in this important growth market, driven by our continued rapid development of multiple brands in Mainland China. Currently, we are in 450 cities in Mainland China with KFC and we are in over 80 cities with Pizza Hut casual dining and expanding into several new cities with broader development of Pizza Hut home service. Additionally, encouraged by the results of our East Dawning TV test last year, we are expanding this new concept further, going from 12 units today to more than 20 by the end of 2008, including restaurants in Beijing in time for the summer Olympics. In terms of development in Mainland China, our brands have an enormous first mover advantage and we do not expect that picture to change for the foreseeable future. Our huge lead is unlike anywhere else in the world, which is particularly important in a market of 1.3 billion people, expanding personal incomes, and an economy growing in the low double-digits. A couple of interesting facts about this growth market -- first, recent government studies suggest that the middle class in Mainland China now numbers over 250 million people, which is equivalent to what the entire U.S. population was in 1990, at which point the U.S. QSR category was already very well-established. Second, China’s Ministry of Information Industry reported last week that at the end of December of 2007, there were 547 million cell-phone subscribers in Mainland China, or roughly 40% of the population. This speaks to how rapidly the country is developing as Chinese consumers embrace new technology and new concepts. These numbers are absolutely astounding and give us reason to believe that the demand for our brands will continue to grow at a significant pace. For KFC, we expect to again add over 300 new restaurants in Mainland China in 2008, which will continue to widen our lead over any competitor. Today we have a lead of more than 1,000 units versus our nearest competitor and we are out-developing them by roughly three-to-one. Our brand majors and returns remain very strong and we expect KFC to continue to strengthen its QSR leadership position in 2008 through the development of new proteins and new beverages and the expansion of our breakfast day part. Our leadership position remains and continues to build for Pizza Hut casual dining. Now with over 350 restaurants and growing rapidly, we are the undisputed leader in Mainland China in this category. We expect to open about 85 new casual dining Pizza Huts in 2008, while at the same time expanding our tea time offering and innovating our menu with a range of new and exciting products. Our Pizza Hut home service business continues to perform well, so we will further expand this concept to more cities to build the scale. By year-end, we expect to add about 20 new Pizza Hut home service units, bringing our total to about 75. Chinese consumers are embracing the convenience and value of home-delivered food and we expect to ride this trend as it gains even more momentum. You can see we remain very focused against our number one strategy of building leading brands in China in every significant category. We have a huge strategic advantage with our stable and experienced management team in Shanghai, our established and state-of-the-art distribution system, our dedicated manufacturing capabilities, and our large scale development team, all of which combine to produce results that are unmatched by anyone in Mainland China and this category is still on the ground floor. As further evidence of our leadership position in this market, just last week Yum! China was voted by CCTV, China’s leading media company, as one of the top 10 best companies in China and the only restaurant company to receive this unique distinction. This only serves to strengthen our ability to attract and retain the very best talent to grow this very large business. As I’ve said before, we believe that with our China business, we are in the first inning of a nine-inning game, so we have a very long runway for growth in this very important market. As a result, we continue to expect our China division will be our lead growth business, delivering 20% growth in annual operating profit. Now on to YRI, where you’ll see from our results that we are driving aggressive international expansion and building strong brands everywhere, our number two strategy. As I noted earlier, YRI had another really good year in 2007 with reported operating profit growth of 18%, driven by 15% growth in system sales. This is one of the best years YRI has ever had and after several consecutive years of significant growth, YRI is now one of the world’s most profitable restaurant companies as a standalone entity, with operating profit of nearly $500 million. And having ended 2007 on a strong note, YRI has entered 2008 with solid momentum. The key driver underlying YRI’s profit growth is that the worldwide development capability of our 700-plus franchisees, enabling us to be the leading player in QSR chicken with KFC and casual dining with Pizza Hut. We opened a record 852 new restaurants last year, the eighth consecutive year we have opened at least 700 new units and a new record for YRI. Ninety-four percent of these units were developed by our franchisees, so the returns in this business are without equal. Importantly, we have plenty of room left to grow both KFC and Pizza Hut in the markets where we operate, as well as markets that we are only beginning to penetrate. For example, we are accelerating our unit growth in India while continuing to develop aggressively in Russia, the Middle East, Southeast Asia, Africa, and Latin America. This really highlights the fact that our franchisees are realizing solid unit economics in their new restaurants, both KFC and Pizza Hut. Additionally, our existing franchise business is very healthy in YRI, with 5% same-store sales growth in the fourth quarter. This performance is especially remarkable given the pace of our new unit development and, like China, speaks to our strong competitive positioning worldwide. The key to this growth is that the YRI team has very effectively leveraged their global product development capability. As great new ideas are generated in various markets around the world, they are quickly adapted in other markets. Great examples of this best practice sharing includes box meals and the Wrapstar in KFC and Cheesy Bites in Pizza Hut. Just last week, Graham Allan and Micky Pant, our President and Chief Marketing Officer respectively of YRI, they took me through their initiatives to develop permanent sales layers and new concepts around the world, from developing a new range of beverages in Australia to testing the KFC breakfast offerings in the U.K. and Singapore, to validating Taco Bell International in Mexico. The team has dedicated significant resources to building future growth platforms for an already rapidly growing business, seeding and shaping ideas that can be replicated around the world. Finally, YRI’s new unit pipeline remains strong. Aggressive development of our KFC and Pizza Hut brands will continue in many markets of the world and for the longer term, you should expect us to continue to build big businesses in India, Russia, and Continental Europe. To summarize, we are very confident YRI will have another great year in 2008, with at least 5% growth in system sales on a local currency basis and 10% operating profit. Like we said in New York, we view YRI as a high-growth business, having the greatest potential of divisions, given the size of the worldwide market that we have yet to penetrate. So stay tuned for more great news from YRI. Clearly our challenge in 2007 was our U.S. business. While fourth quarter same-store sales increased by 1%, operating profit was down 1%. In all candor, the best thing I can say about our weak U.S. performance in 2007 is that it sets us up for growth in 2008 and we can’t wait to get into 2008. I guess we’re already in it but we are glad we are here. This is especially true when you consider that last year’s results were primarily impacted by two isolated and now distant incidents that affected our largest and most profitable U.S. brand, Taco Bell. Meanwhile, Pizza Hut made significant progress and KFC basically stood still. As I outlined earlier, our number three growth strategy is to improve U.S. brand positions, consistency, and returns, and as I shared in New York, our disappointed U.S. results in 2007 have strengthened our resolve to take the bold steps that are necessary to bring this growth strategy to life. Learning from our experience and building a strong and growing business in China, and from studying the successes of our U.S. competitors, we are now implementing five key strategic initiatives to turn around our U.S. business. Number one, providing more balanced menu options; number two, moving in to multiple day parts; number three, offering multiple proteins and product layers, including aggressively pursuing beverages; number four, everyday value menus; and number five, continually contemporizing our assets. These initiatives will take shape over the course of 2008 and begin to yield meaningful results in 2009. That said, given the weak results we’ll be lapping from 2007, coupled with the stronger marketing calendar and better overall execution this year, we are confident that we can achieve 2% to 3% same-store sales growth and 5% operating growth in our U.S. businesses in 2008. I’ll now talk about each of our three key U.S. brands. As you know, Taco Bell is the second-most profitable QSR brand in the U.S., with a 70% share of the Mexican category, and is perhaps the most charismatic QSR brand appealing to young Americans. Our long-term goal is to make Taco Bell a true restaurant mega-brand, leveraging our unique, Mexican-inspired positioning. The good news is that we are building a strong momentum from 2007 to propel us on this journey. Over the course of last year, we experienced a gradual improvement in Taco Bell sales and achieved same-store sales growth of 2% in the fourth quarter, demonstrating that we are starting to turn the corner with this great brand. We started 2008 promoting one of our customers’ all-time favorite products, Cheesy Gordita Crunch, underpinned by a secondary message promoting our $0.99 Cheesy Bean and Rice Burrito, giving us a strong start to the year. We followed this with yesterday’s launch of Fiesta Platters, which was featured in Super Bowl advertising over the weekend. This new product is a complete real meal solution that packages together all the favorite dishes of a sit-down Mexican meal in a convenient and portable plate. Great for lunch and dinner, all at a strong value price relative to comparable meals at sit-down restaurants. As we are pairing this launch with a secondary message promoting our $0.99 Gordita Supreme, we are now offering value at the high end versus casual dining at dinner, along with value at the low end versus fast food, a powerful combination. We consider our multi-layer marketing approach to be a breakthrough strategy for Taco Bell that will help drive much-improved performance in 2008. And there is even more exciting product news on the horizon for Taco Bell as we introduce our new signature beverage line this summer, Frutista Freeze, and prepare for the launch of other breakthrough products later this year. You will also see us build greater awareness of our great taste, less fat, fresco line of products through a combination of print and online advertising and in the spring, we plan to invigorate our already leading value positioning with a compelling why pay more menu that builds on the success of our Think Outside the Bun advertising campaign. Finally, we are also continuing to develop our breakfast offerings with the full intention of eventually entering and winning in the breakfast segment. In fact, our future vision for Taco Bell is ultimately 24-hour operations. Obviously we’ve got a long way to go and a lot of work to do to make this happen, but I want you to know something -- we are striving to get it done and we are going to make it happen. So as you can see, we are regaining our edge at Taco Bell and expect this brand to achieve very good results in 2008 as we build a platform to support even stronger growth ahead. To update you on Pizza Hut, as I outlined in New York, we are on the verge of a major reinvention of the brand and delivery category as we drive the aggressive rollout of three new permanent sales layers at Pizza Hut -- pasta and Wing Street Chicken and everyday pizza value, alongside our category leading pizza innovation. Just last month, we introduced Pizza Mia, a value oriented product that we will promote year-round, all day, every day, currently priced at three for $15. Initial sales of this product have been strong, supported by a compelling value message and heavier national television weights, which you’ll recall from our presentation in New York includes an additional three quarters of a percentage point approved by our franchisees late last year because they are so bullish about our marketing plan. And we will continue to be the pizza innovator. As evidence of this, I encourage you to try our new crunchy cheesy crust pizza, which was launched just this month. Even more exciting is the launch of Tuscany pastas in April. This represents a first for the quick service restaurant business, with home delivery of restaurant quality, great-tasting hot pastas, all at a great value for families looking for an alternative yet affordable break from weekday kitchen duty. Additionally, we are beginning to gain significant momentum with the rollout of Wing Street conversions. We’ve reached an agreement with our franchisees to dramatically expand Wing Street into our existing Pizza Huts and by the end of 2009, we’ll be in position to advertise America’s largest wing chain on national television. Given the competitiveness of the Pizza category, I cannot provide anymore specific information on the balance of the year marketing activities, but I can tell you that we are confident about our ability to grow our Pizza Hut brand in the U.S. by developing layers of sales, not limited time only topping offers. And in particular, what we are doing to transform Pizza Hut into a home meal replacement business. At KFC, results for 2007 fell short of expectations and underscored the need for dramatic change. As we talked about in New York, we are working with our franchisees with the goal of offering a new range of grilled and portable products any way you want it alongside our traditional delicious fried chicken. In addition, we plan to give the business a more youthful and contemporary image as we launch a new advertising campaign later this month. We entered 2008 with our sauce-less yet spicy hot wings product at an attractive price point of $2.99, capitalizing on the end of the football season and providing a good start to the year. This marketing window benefited not only from a strong product offer but from an improved advertisement as well, plus an incremental half percentage point spread stint on national television as voted in by our franchisees last year. Building on this momentum, we will introduce later this month a great tasting, value-priced toasted wrap and we will follow this up with the introduction of another grill pressed portable product later in the year to solidify our position at lunch. Looking longer term, we are excited about the launch of our non-fried chicken platform and we are making good progress with our franchise partners to prepare for the rollout in the first half of 2009. This platform will form the centerpiece of our overall brand transformation in KFC, giving us the flexibility to sell a delicious range of products any way you want it. Work is also continuing on our value-oriented products as well as a range of signature beverages to strengthen KFC as a destination brand. Now on the development side in the U.S., we continue to expect new unit growth to ramp up at Taco Bell, achieving 2% net new unit growth in 2008. Additionally, we expect our Taco Bell re-image activity to gain greater momentum as our franchisees have embraced a new step to bold initiative that will accelerate the rollout of our contemporary bold choice restaurant design, which has been very well-received by our customers. We are also making good progress with asset re-images at KFC and Pizza Hut. On the KFC side, contractually mandated asset upgrades will be completed for virtually the entire system by the end of 2008 and with Pizza Hut, our Wing Street conversion program, which I mentioned earlier, will help drive asset improvements at our restaurants. Lastly, we expect to continue to generate a lot of cash in the U.S. this year and with continued refranchise activity, our U.S. EBITDA after capital expenditures should grow in 2008. To summarize the U.S. business, we expect to meet our full-year targets for growth in sales and operating profit, supported by bold new brand initiatives as well as a relatively weak lap from 2007. While the performance of our U.S. business has been below expectations in the past, we have adopted breakthrough strategies to turn the business around with urgency. I have seen the analyst reports that reflect a lot of skepticism about our ability to accomplish this transformation in the U.S. and I have sent them out to everybody in the U.S. And I understand that many will not believe it until they see it. That said, I invite you to attend our investor conference in Louisville in May where you will see and hear and taste tangible evidence of how we plan to leverage our U.S. assets. As I said in New York, our U.S. business is an outstanding value investment with tremendous asset leverage and we are committed to unlocking this value over the next two to three years, and our U.S. teams have a lot of pride. There’s a lot of pressure out there. They are putting it on themselves and we want to deliver. Our fourth and final growth strategy is to drive industry-leading long-term shareholder and franchisee value. The good news is that we are already a leader in return on invested capital, not only among restaurant companies but among large cap, global retailers and consumer packaged good companies as well. So we are starting from a position of real strength. The fact is that Yum! Brands is an incredible cash machine, with each of our divisions generating free cash flow or effectively funding their own capital investments. As this capital is deployed to high return opportunities, for example, new restaurants in China where the cash payback is only two years, we expect our returns to remain strong. These returns will further improve as we continue to refranchise restaurants, which will increase our franchise fees, currently amounting to $1.3 billion, with no capital investment, which makes those kind of returns unbeatable. We’re proud of the fact that we are one of the few companies that can make significant capital investments year after year and make great investments in large scale share buy-backs and pay a meaningful dividend and grow EPS consistently in the double digits. Our commitment is to continue this tradition of rewarding our shareholders with superior returns. For more on our financial performance and outlook, I’ll now turn it over to Rick Carucci, our CFO. Rick. Richard T. Carucci: Thank you, David. Good morning, everyone. In this section of our call, I’m going to comment on four items -- 2007 full year results, 2007 fourth quarter results, our U.S. refranchising program, and 2008 guidance. However, before I do that, I would like to address some questions that surfaced yesterday -- sorry, that surfaced following yesterday’s earnings release. On the surface, our fourth quarter reported numbers understate the underlying strength of our business. Although operating profit increased only 1% and net income was essentially flat to prior year, our revenues increased 8%. Furthermore, operating profit was reduced by unusually high G&A on the quarter, driven by incremental investments in growth projects, charges associated with certain restructurings, higher-than-expected incentive compensation partially offset by unexpected insurance recovery related income. All of these items combined to reduce our year-over-year operating profit growth percentage by eight points, reduce our net income growth percentage by nine points. Said differently, in the absence of these charges, both our operating profit and our net income would have grown 9%, which are numbers consistent with our strong track record of performance. With that said, I would like to turn our focus to the four topics I outlined earlier. Starting with our full year results, I would like to highlight three foundations of Yum!'s financial story -- our consistency of results, our global reach, and our strong cash generation. First, for the sixth straight year, we met our commitment to deliver EPS growth of at least 10%, delivering 15% growth in 2007. We take our commitments to shareholders very seriously and consistency of performance is a top priority. Second, we continue to expand our business around the world, opening a record 471 new units in Mainland China and a record 852 units in YRI. This broad-based unit expansion is central to our ability to meet our profit targets of at least 20% growth in China and at least 10% growth for YRI. We consider our global development engine to be a key competitive advantage. Clearly we are pleased with these development results in 2007 and our outlook for 2008 is also strong. And third, we returned a record $1.7 billion to our shareholders last year -- share repurchases of $1.4 billion and dividends of almost $300 million. Over the last two years, we repurchased nearly $2.5 billion of our stock at an average price of $29.31, which we believe has created significant value for our shareholders. Over the next two years, we expect to repurchase about $4 billion of stock, further reducing our share count by approximately 20%. With respect to our fourth quarter results, I would like to briefly comment on our key businesses. First, I am also very excited about our China performance, which is phenomenal by almost any measure. Perhaps the most impressive result though is bottom line growth of 44%, lapping 36% growth from the year before. There are very few businesses anywhere that can drive same-store sales growth of 17% while developing new units at a record pace, and there are probably fewer businesses that could absorb roughly 35% inflation in the cost of their number one commodity -- in China’s case, chicken -- and yet experience less than a half point of margin dilution. The fourth quarter results again demonstrate how very special our China business is. YRI delivered fourth quarter results in line with expectations. Importantly, this was another high quality quarter, largely driven by system sales growth of 9% pre for-ex. This system sales growth was underpinned by continued strong unit development and 5% same-store sales growth. Also, as noted in our release, YRI’s 11% growth in reported operating profit was achieved after accounting for incremental investments and KFC sales growth initiatives, higher incentive compensation, and selected market level organizational restructuring. These items amounted to five points of profit growth. All together we were very pleased with YRI’s fourth quarter performance. By the way, as David mentioned, YRI now generates nearly $0.5 billion of annual operating profit. U.S. results were below our expectations, as David noted. Fundamentally, fourth quarter same-store sales growth of 1% was insufficient to offset rising commodity costs, resulting in a 1% decline in U.S. operating profit. That said, profits held up pretty well for the fourth quarter and for the full year 2007, when you consider the weak sales at Taco Bell, our overall same-store sales softness, and higher-than-normal cost inflation. This reflects our disciplined cost management and is the result of much hard work by Yum!'s domestic teams throughout the year. As David indicated, we anticipate better performance in the U.S. for 2008 and remain confident in this outlook today. On the non-operating side, our tax rate was much better than we had expected in the fourth quarter, yielding a full year rate of 23.7%. Higher foreign tax credits were the key driver of this upside to our forecast. While we are happy with these results, as we previously mentioned we do expect our tax rate to trend upward over time. For 2008, our tax rate is expected to be between 28% and 30%. Before I transition to an update on refranchising, I want to comment on one other aspect of our financial performance in 2007, capital spending. In December, we indicated that our capital expenditures for 2007 would be approximately $700 million. We actually spent closer to $740 million, but the good news is that the extra capital largely went towards higher return on investments for new restaurants in China. In December alone, we opened over 90 new units in China. That’s an amazing three new restaurants per day. Now for a brief update on U.S. refranchising. At the end of 2007, our U.S. company ownership stood at 22% of the entire system. As we announced in December, we intend to reduce this ownership to potentially reach below 10% by the end of 2010. Due to a number of factors, including market conditions, it is extremely difficult to predict the exact timing of this refranchising activity. We remain confident we will achieve our U.S. refranchising goal over a three-year period and we will do it the right way for our brands, our operators, our franchisees, and our customers. Over the next three years, you should expect to see continued proceeds from refranchising, positive benefits to U.S. restaurant margin, operating margin, and Yum! ROIC, and less demand on capital expenditures from the U.S. business. In my update on 2008 guidance, I’ll speak to the one-time earnings impact we expect to see this year. With 2007 in the books, let’s quickly cover our 2008 outlook. First of all, our growth model remains unchanged from what we presented in New York, which includes 20% operating profit growth from our China division, 10% operating profit growth from YRI, and 5% operating growth from our U.S. business. This adds up to be between 9% and 10% growth in operating profit. Combine this with a higher tax rate, higher interest expense, but expected share reductions, we are confident in our ability to deliver EPS growth of at least 10% in 2008, or $1.85 per share. For 2008 earnings, there are two important twists that I want to point out. First, as we discussed in New York, given the loss of a roughly $30 million VAT benefit in Mexico this year, YRI’s 10% earnings growth target will be more challenging to achieve than in past years. Fortunately, we expect foreign exchange upsides will continue to provide some measure of protection to YRI profits, so we remain confident that YRI will again achieve its 10% profit growth target. Second, we will realize significant one-time net gains in 2008, which are very important to understand in order to properly evaluate the underlying performance of our business. As outlined in our release, in quarter one alone we’ll benefit from roughly $60 million of one-time net upsides, including a gain from the sale of our minority interest in KFC Japan, restructuring charges to drive stronger U.S. brand growth, and expected refranchising losses. On a full year basis, we expect a net positive impact from these quarter one items and future U.S. refranchising and brand investments. We are currently estimating the full year impact to be about $50 million in pretax profit, or about $0.06 of full year EPS. This is not included in the $1.85 ongoing full year EPS target I mentioned earlier. Let me repeat that -- the estimated $50 million of one-time positive impact is not included in the $1.85 full year EPS target. Therefore, combining the baseline EPS of $1.85 with projected one-time benefits of $0.06, we are currently guiding to full-year reported EPS of $1.91 for 2008. We will update you on total and one-time EPS figures in future earnings releases, but I want to stress the importance of understanding baseline EPS as we go forward. Also, please understand that there could be considerable volatility during 2008 of these one-time benefits from our U.S. refranchising and brand transformation. To wrap up, we expect another successful financial year for our shareholders, generating consistent financial performance, impressive global growth, and strong cash flow. Back to you, David.

Thank you very much, Rick. And so I think you can all see that 2007 was in total another very strong year for Yum! Brands. We are truly in a unique position as a restaurant and retail company to be able to turn in such good results in a challenging environment, and with the [inaudible] of China and the stability of YRI’s growing franchise fees, we are able to weather difficult storms. We’ve done it in the past and we can do it in the future. The U.S. is clearly our most competitive market yet our poor performance in 2007 is basically -- we look at it as a mixed blessing, as we get to overlap those results in 2008. This, along with a significantly stronger stable of sales building initiatives to drive growth across all our brands gives us confidence that we will achieve our profit goals in the U.S. With all that said, you can expect 2008 that Yum! Brands will once again differentiate itself as not your ordinary restaurant company. So with that, we’d like to open it up for questions and we look forward to talking to you all. Thanks for being on the call.

(Operator Instructions) Your first question comes from the line of David Palmer with UBS. David Palmer - UBS: Congratulations on another good year, especially in international. I first wanted to ask a question about East Dawning. I have a feeling you want to talk more about this in your fall meeting out there, but I was wondering if you could give us a sneak peek. Can you give us any details on the returns on East Dawning? How are the new East Dawnings comparing to maybe KFCs in terms of sales volume and margins, and that’s versus the new KFCs. Assuming there is lower volume, maybe you can give us a rough sketch of how close it is and maybe some of the changes you’ve made that may be making the return on investment more appealing for this concept. Richard T. Carucci: Let me talk first about the economics and then I’ll talk a little bit about the concept, and David may want to add to that. It’s really too early for us to get into projected returns, et cetera. We’re still working on fine-tuning the economic model. From a sales perspective, the sales actually in peak periods of lunch and dinner are actually very comparable to KFC figures. What we’ve been working on especially hard the last year is getting the sales up at some of the snack time periods, the later afternoon, later evening day parts. And with the recent advertising we did, we actually did see a spike in sales there, so we are very encouraged by the recent sales increase that we’ve got, which obviously bring us closer to the economics that we need. In terms of changing the concept, we have changed the cooking platform over time. When we first started it, it was heavily commissary and then our second version to increase the appeal to the customers, we went with almost exclusively in-store prepared, and now this third version, we actually have a blend of both commissary and in-store prepared, so we think we are getting closer to getting the right cooking platform, which obviously will help the economics. David, I don’t know if there’s something you’d like to add on the concept.

No, I just think the team is very confident. We’re very comfortable making a continual progress on this. We see this as a big idea. We are going and improving at the same time, so we are moving from 12 restaurants to 20 restaurants, which I think is a good sign that we think we can ultimately get there. And this is very consistent with our strategy to build leading brands in every significant category. Obviously Chinese food is the number one category in China, just like the hamburger has been traditionally in the United States and we’re embarking on really creating the first Chinese fast-food restaurant chain there. So very excited about it, the team is very targeted on what needs to be done, which as Rick said is to expand the use of the facility more throughout the day with the snacking occasion. If you go over there for the Olympics, we will have East Dawning in Beijing. You can give it a try there but I think you’ll find that the food is excellent. And what we are really bringing there with East Dawning is excellent food, affordable pricing, and facilities that are consistent with the KFC asset base, which is a major advantage in that category. So you know, it’s early days. Lots and lots of optimism. We expect this to really pay off for us on a long-term basis. David Palmer - UBS: Thanks.

Jeffrey Bernstein, Lehman Brothers. Jeffrey Bernstein - Lehman Brothers: Thank you. Actually, a couple of questions further on China, one kind of more specifically -- the restaurant margins were impressive. It seems like there was only a modest decline. I think your guidance was for 200 basis points. It looks like you got some significant leverage on the food costs. I’m just wondering if you can perhaps put out details on the outlook for the first half in terms of pressure on costs, moderation, specifically related to I guess contracts for the commodities and perhaps pricing, and then I had a follow-up on China. Richard T. Carucci: Regarding the commodities throughout the year, we really just know the first quarter costs will be a bit below what we had in the fourth quarter this year and we are in the process of finalizing negotiations for the quarter after that, so we’ll have a better handle for it after we complete those negotiations. We do expect, since we had a large increase in the back half of the year, we obviously expect food inflation on the first half of the year and negative inflation the second half of the year when we start lapping the very high chicken costs. Jeffrey Bernstein - Lehman Brothers: And the pricing in that market, should that provide more of a margin lift in the back half then, or -- Richard T. Carucci: Well, we haven’t taken pricing yet in ’08. Again, as a reminder, we took modest price increase the beginning of ’07 and then we took a larger price increase in the middle of ’07, so we feel pretty good about our pricing. Obviously you have to judge that on the context of what happens and what we think will happen regarding the chicken commodities in the back half of the year, but we feel pretty good about it. The other thing that the team has done a good job of, this is from a consumer standpoint great but also great from an economic standpoint, is we were very successful with the fish introduction of products in the back half of 2007, so we are actually running fish at a higher percentage of the menu than we thought we would be at this point and we are pleased with that and that helps us a little bit on the cost side. Jeffrey Bernstein - Lehman Brothers: Okay, and then just one follow-up question, kind of more broader; obviously you guys are very excited about China and the results justify that. I’m just wondering perhaps if there are potential inhibitors to faster growth. I don’t think it’s capital -- perhaps human resources or site selection, but obviously the results are tremendous and growing at the same time as delivering very strong comps. I’m wondering why we wouldn’t see a further acceleration on the unit growth.

I think in December we opened almost three a day, so we are moving very aggressively in China. I think the big thing we want to do in China is we build a world-class business and we ensure that we have world-class operating teams, great sites, and that’s really what we are focused on, making sure that we do so that over time, the business is as great as it can be. We never want to get ahead of our people capability. We have tremendous people capability. We never want to get ahead of our site selection. We’ve got the largest retail development team in the world, so we’ve got all the resources to keep growing at the kind of pace that we are growing. We’re just going to -- there’s no need to grow any faster, from our perspective. We want to grow right and I think where the big development gains will come will be through the expansion of Pizza Hut home service, which is basically an embryonic concept at this stage, and with the development of East Dawning. I think both of those concepts will give us some opportunity to have a step change in terms of our development but again, both of those concepts are more in their embryonic stages. So we’re just going to keep growing at a steady pace. I think the most exciting thing for me on China and what we are seeing is driving so much of our growth is the one little fact that I mentioned to you earlier, that the Chinese Ministry report -- 540 million cell phone subscribers in China. Now that’s -- what we’re seeing is a lot of youthful kids now who can afford our food. Not everybody can afford our food every day but just think about if you have 550 million cell phone subscribers, I’ll bet you those people can afford us at least once a year, and that’s only going to get better as we go forward. So this is a very exciting time for us. We’ve got a great business. We want to protect it and grow it in an absolute, high quality fashion. So that’s our goal. We’ve got plenty of earning upside in our company or earnings capability to deliver at least 10% every year and we are not going to try to be a hero one year. We want to keep having lots and lots of good years. Richard T. Carucci: And David covered these numbers in his speech but I think they may be worth repeating in a competitive context. KFC, we ended up adding net units above 300 for the year, right? So our lead versus competition there is really expanding and continues to expand. Amazing numbers -- Pizza Hut casual dining added almost 100 units off a base of 250 last year. That’s a staggering number. It’s in the release but that’s a 38% increase there and there’s really nobody in western casual dining. And in the emerging categories of home service and East Dawning, we are making inroads. So I feel good not just about the absolute numbers but how it positions us from a competitive standpoint. Jeffrey Bernstein - Lehman Brothers: Thank you.

Glen Petraglia, Citigroup. Glen Petraglia - Citigroup: Thanks. Good morning. David, I was hoping you could comment on specifically Taco Bell. Back in I think it was October at the Taco Bell investor day in California, some data was shared about consumer survey work and how consumers have seemingly remembered or are increasingly forgetting about the issues of about a year ago. I’m curious to know if you feel that you are fully beyond that now or is that still impacting your business to a degree?

Well, I think we definitely have turned a corner. We did have same-store sales growth last year off of very weak numbers in the fourth quarter. We feel like we are off to a very good start this year and so we are basically running the business today as if it’s behind us. And we anticipate a very good year at Taco Bell, because -- you know, if for nothing else, the fact that we’re just overlapping the performance last year. But beyond that, we’re just very, very excited about the projects we’ve got in place. We’re building off what we think has to be one of the strongest advertising campaigns that positions us as the sandwich alternative with Think Outside the Bun. We’ve got a great line of product innovation. We’re going to being building awareness of the Fresco, which is a great taste, no sacrifice line of products which we think allows us to potentially really go after the people that want to add more balanced options in a much more aggressive way. We’ve reframed our value menu to really dramatize what makes it really special by going back and capturing some of our historical equities, which you’ll see by mid-year under the Why Pay More? We’re launching a Frutista Freeze line of beverages which was tested and proven enough to the point that the franchisees have made the equipment investment, and we think that gives us a platform to go after a big booming category that Sonic has frankly dominated without a whole lot of competition. And that’s our user base right there that we think we can tap into. And we’ve got some very -- I would say very interesting ways to segment our business with different proteins. We are testing breakfast and looking at how to get after that and even with the line of the Fiesta platters, that gets us -- you know, that’s a high quality meal, a great value that is I think positioned well up against casual dining at times like this. So we are going up against the high end and the low end. So we think we’ve got a heck of a good plan for Taco Bell and the good news is the unfortunate incidents are very distant now and behind us. There is a little bit of a hangover in some of the research but we expect that to go away in total through the balance of 2008. So very optimistic about Taco Bell and the team is very excited about what they’ve got going, so I think you’ll be pleased with the way we are taking the brand. The other thing that is exciting about Taco Bell is that we had net new unit development last year in spite of all the problems that we had and this year it’s going to be a plus too, so you’ve got a concept here that’s the second most profitable restaurant brand in the United States that only has 5,000 restaurants, 5,000 traditional restaurants. So we are not even close to cannibalizing ourselves and we’ve got asset bases that we think we can do a lot and our future back business is to keep building the sales layers, much like McDonald’s has done, to get us to ultimately over the longer term to 24 hours of operation. And we can do that with a real distinct positioning. Right now we have a 70% share of the Mexican quick service restaurant category, right around in that range. So we are very bullish on Taco Bell. We’re very glad that 2007 is behind us and we are very happy that we’ve got 2008 just staring us in the face and we just want to put the numbers up on the board to get everybody feeling as great about Taco Bell as we are. Glen Petraglia - Citigroup: Thank you.

Jeffrey Omohundro, Wachovia. Jeffrey Omohundro - Wachovia: Thanks. Good morning. Just another question on China -- I wonder if you could give us any update on any potential impact on traffic or commodity from the recent storms that have impacted much of the country. Thanks. Richard T. Carucci: Okay. Well, first I am pleased to report that neither rain, nor sleet, nor snow, nor dark of night can halt our China business. But it’s had -- our team has had to work very hard given the weather that’s been there in China. We’ve had about 20 restaurant closures temporarily over the period of time, although those are now minimized. It’s probably going to have about a one point impact for the quarter on our same-store sales growth and the extra cost of getting the product to our locations is sort of negligible, so that really won’t impact us much. But again, I would like to emphasize the logistics team we have in China -- first of all, that gives us the competitive advantage that we’ve said before. We were able to work through a lot of these issues, especially the northern part of the country. And the logistics team together with our supply chain just really put out an all-out effort, so I was pleased we had the competitive advantage but I was also very pleased and thank the effort of our China team to get us through this. And we’re glad that that’s largely behind us now that we are into the Chinese New Year season, which is a very high sales season for us. Jeffrey Omohundro - Wachovia: Thanks.

Howard Penney, FBR Capital Markets. Howard Penney - Friedman, Billings, Ramsay & Co.: Thanks very much. Unfortunately, easy comparisons don’t necessarily mean easy comparisons and maybe from your prepared remarks, can you pick one or two of the bold initiatives that are really going to transform the U.S. business and make a difference in 2008?

Well, Howard, I just gave you about five in Taco Bell. I think when you look at Pizza Hut, I think what you are looking at Pizza Hut is we are launching the Tuscany Pastas, which I think is the biggest news of all that we have at Pizza Hut this year, in addition to the fact that we’ve got an all-day, every day sales layer now with Pizza Mia, which allows us to compete more effectively for the lower end of the category, the value seekers. We also I think have a much more effective discounting strategy which will pay off in terms of profitability, so those are the three big things at Pizza Hut and we continue to add Wing Streets but we’ll be national advertise Wing Street by the end of -- by 2009. The other -- when we look at KFC, I think KFC this year will be introducing a toasted line of grilled pressed products, which we think will be differentiated in the category. But we really see in terms of our longer term plan at KFC that 2009 will be our bigger, bolder initiative with the launch of the -- the planned launch of the grilled products. So I feel we can have a solid year at KFC but I think the bigger initiative for KFC will be coming in 2009. The other thing that we have at both KFC and Pizza Hut is that the franchisees have voted for incremental national advertising, so this allows us to really sell multiple layers of messages across the year. For example, right now we are advertising Pizza Mia and our new crunchy pizza at Pizza Hut, which I think is a much more powerful punch than just launching Pizza Mia and forgetting about it. We’re able to continually advertise Pizza Mia as a value layer throughout the year, plus have innovation like the cheesy crunch, plus introduce the pastas. So I think that’s a big deal. At KFC, we’re able to do toasted wrap sandwiches and do high-end chicken on the bone to protect our chicken-on-the-bone base business. So that gives us the opportunity to have a one-two punch there as well. So listen, do I wish we were overlapping a better year last year? Absolutely. In this kind of environment though, where everybody else seems like they have a lot more wind in their face, it’s not bad to have a 2007 like we had to overlap, especially when you know you’ve got a hell of a lot better programs than we had the previous years. So I’ll take that and I’m very convinced that we can deliver 2% to 3% same-store sales growth and 5% profit growth in 2008 and you combine that with the power of China and the power of YRI, I think there are very few retailers, very few restaurant companies in the world that have the kind of play that we have this year as we go forward. And more importantly, more importantly to your point is that we know this is all about the long-term and when we look at our 35,000 restaurants around the world, we’ve got opportunities for huge leverage. That’s why we are testing breakfast in Singapore. That’s why we’re testing breakfast in the U.K. Those are lead markets for international. That’s why we’ve got fish going in the [inaudible]. That’s why we’ve got beverages going in Australia. That’s why we’ve got oven-roasted being tested in Malaysia. We have so many ways to leverage our existing assets, not only in the United States -- all this stuff will work around the world, which is one of the reasons why China is doing so well. They’ve got a tea time at Pizza Hut casual dining. They’ve got breakfast, they’ve got beverages at KFC. We are on a major strategy to get much more asset leverage by being much more driven to bring relevant sales layers to our business. This is the same strategy that worked for McDonald’s. It’s the same strategy that’s worked for us in China and we think that we will put wins on the board slowly and surely, but when you look at our business three years from now, you will look back and you will see a changed business clearly in the U.S. where we are upgrading our assets while we are doing all this stuff, and I also think you’ll see a changed business in international because our assets will be better utilized as we go forward. So we have a very good strategy for the long-term and we are going to get after it. So we’ll just keep reporting our progress.

Rachael Rothman, Merrill Lynch. Rachael Rothman - Merrill Lynch: Good morning, guys. Just to follow-up on the refranchising, can you talk -- it seems like the ’07 target came in a little light of your initial guidance for I believe 600 units. It looks like it came in at three. Can you talk about what they dynamics are in the refranchising market currently and whether or not you are seeing any pressure on the multiples or cash flows and why you have confidence in the $1.1 billion, given the shortfalls in ’06 and ’07? Thanks. Richard T. Carucci: First of all, regarding our original plan, we were very happy with the progress in ’06. I’ll talk about ’07 in a minute but going forward, as you look at 2008 and beyond, a couple of points. First of all, the restaurants that we are selling at this point are some of our better performing restaurants by brand. So we have restaurants that we think are going to be very desirable to existing franchisees in particular but also as we go out, we do want to expand our franchisee base. So we are selling relatively good restaurants. The second reason is the size of the deals that we come through are generally smaller type deals so the credit type crunch that is on bigger deals hasn’t really yet hit that size market. Related to that, we’ve never done crazy deals on leveraging, et cetera, so we’ve always had common sense types of leverage. In fact, we require it. We don’t allow people to over-leverage their business if they are franchising. So at this point, we are confident that the market conditions will allow us to do it. Regarding ’07, part of the reason we are selling a fairly big block of stores in California. We were hoping to get those done in ’07. We are confident those will get done in ’08 and we’ll be back on track towards hitting our goal. So like I said, I feel good about the progress that we are making and I feel good about our prospects. And we’ve given ourselves three years to do it, so again I am still very confident under current conditions we’ll be able to do that. Rachael Rothman - Merrill Lynch: And in terms of your G&A, I know you guys mentioned in the release something about maybe litigation costs. Are there any one-time costs that made your G&A higher? It was much higher than we would have thought. Were there any one-time items that we should be considering there? Richard T. Carucci: There weren’t any huge one-time items. The biggest increase year over year was the higher incentive pay. We did have a bunch of I’d call smaller one-time items, so for example, we had consulting costs, [inaudible] and other areas. We had the world food program, et cetera. So we had a little -- we had a higher than normal closures. We probably pulled forward some that would have normally occurred in ’08, so it’s been more of a series of small items than one big item. Rachael Rothman - Merrill Lynch: Okay, great. Thank you very much.

Steven Kron, Goldman Sachs. Steven Kron - Goldman Sachs: Thanks. Good morning. Following up on Rachael’s questions on the G&A, on the corporate G&A, you mentioned things about strategic projects and I know you’ve discussed this in the past but can you be a little bit more specific as to where those dollars were spent? And also, compared to the guidance provided in December, it seems like the first quarter of ’08, there’s going to be a little bit less of this stuff. So did you pull some of that strategic spending forward or is there just a change in the total dollars estimated going forward? Richard T. Carucci: Well as I said in answer to Rachael is we didn’t have huge items so it’s not like we took some huge buckets of money. But I’ll give an example of something that we are pushing. As David talked about drinks, we’re trying to get more resources against getting drinks started, so we had more spending against drinks in the fourth quarter of ’08 than we had -- sorry, fourth quarter of ’07 than we had before. In terms of -- probably the one pull forward is really more around closures. We had a fair number of international closures that are a little higher than normal. That would probably be the only impact that would impact Q1 of ’08. Steven Kron - Goldman Sachs: Okay, and then a second question just on the cash flow statement -- obviously a lot of focus on free cash flow generation, given what you guys have outlined as to cash returned to shareholders over time and the evolution of the business model. I just look on a year-over-year basis, free cash flow grew around $140 million, $150 million and I know there’s a lot of give and takes within the operating cash flow line but one thing just jumped out at me -- the changes in accounts payable delta on a year-over-year basis was around $150 million favorable, and I’m just wondering -- is there anything different from changes in payment terms or anything like that that we should just be aware of?

No, not really. There were no changes in payment terms at all. Accounts payable, depending on when our fiscal year closes or the quarter closes, the time of the month can vary quite a bit and that’s just a factor of our retail business. So if the close happens to be in the middle of the month, sometimes our utility bills, which are pretty significant if you add up all the company stores we have, that can really driven the number in any given quarter or any fiscal year-end, just because of the timing of when that cut-off is. It’s not related to any payment terms at all. Steven Kron - Goldman Sachs: Okay, I just wanted to make sure because versus history, it looks like a big jump. Okay, fair enough. Thank you very much.

Virginia Chandler, J.P. Morgan. Virginia Chandler - J.P. Morgan: Thanks. A question on the planned $2 billion or slightly more than $2 billion of shareholder returns in 2008. How much of that are you budgeting to be funded by incremental debt versus internally generated cash? Thanks.

Thanks for the question. If you go back to our Q3 earnings release, we did say we anticipated repurchasing up to $4 billion of our company shares over a two-year period looking forward. We did say it will be funded from company cash and new debt. We went to market and got $1.2 billion of cash from incremental debt in mid-October and we did expect that we would probably be doing more this year based on the leverage ratios that we committed to, publicly and with the rating agencies. So we are looking at possibly going back to the public debt markets again this year, probably later in the year. We are going to try to be as flexible as we can. Unfortunately, we did get a very -- we renegotiated our credit facility also late last year and that gives us a tremendous amount of flexibility. Very good interest costs with its LIBOR plus I think 27 basis points, so we are going to utilize that as much as we can during the year in acquiring our stock back. Which you can see we did a lot of at the end of the year last year and we’ll go to the market when we think it’s right for us. You know, it’s been very volatile but we will likely go back to the market but at the same time, we are going to try to utilize our credit facility, given the great interest cost. Virginia Chandler - J.P. Morgan: Okay. Thank you.

Joe Buckley, Bear Stearns. Joe Buckley - Bear Stearns: Thank you. A couple of bookkeeping type questions first -- on the YRI comments about the operating profit growth being negatively impacted by five points, and you mentioned some spending initiatives and what not, where does that fall in the income statement? Is that primarily G&A or is that spread throughout the income statement? Richard T. Carucci: It’s primarily G&A and also in franchise and license expense. Joe Buckley - Bear Stearns: Okay, and then on the refranchising, I noticed your 2010 goals are the same. At one point you thought you could get down to 17% company units by the end of ’08. Is that still an interim target or is that slipping a bit? Richard T. Carucci: Well, mathematically it ends up being pretty close, Joe. We don’t -- we sort of look at the below 10% as our new target but we’re around 22 today, so if you straight line going from 22 to 10, you get fairly close to that. Joe Buckley - Bear Stearns: Okay, and then just a question on trends and through your businesses -- first of all in the U.S., there’s been a lot of talk about potential slowing in QSR and I realize you’ve got these year-over-year comparisons that are going to match some of that but I’m just kind of curious of your read on the QSR business in the U.S., you know, what you are seeing. It seems like KFC slowed down a bit at the end of the quarter. I’m curious what you are seeing so far in ’08, if you’ll comment. And then conversely, just what drove China so dramatically in the fourth quarter and how sustainable do you think those very strong trends in China are? Richard T. Carucci: Let me take the China question first and then I’ll let David talk about his view on the U.S. You know, China, you can never anticipate a quarter as strong as that one going forward. I mean, as an example, in the fourth quarter when we added -- in December when we added 90 restaurants, our traffic growth was double-digit and we told you we took some pricing increases during the course of the year, so you are not going to have months like that always but it’s obviously a great month to build on to. So we are confident that China does have momentum, the economy there still has momentum, so we feel very bullish about China in ’08. Obviously have a huge for-ex benefit as we in ’08, so we feel very good about China in ’08 although I can’t promise quarters like this fourth quarter every time. Joe Buckley - Bear Stearns: Is there anything you guys did to stimulate the business in the fourth quarter? Richard T. Carucci: I mentioned the fish program I thought was very successful, so I think we did better than the industry because of that program and obviously we just have a very strong business year-in and year-out. So that was probably the one activity we did that sort of maybe made it stronger than usual.

I think the other thing in China is that when brands are really working on all cylinders and you’ve got your positioning and your advertising right and your operations are excellent, it’s kind of hard to slow yourself down when an economy is growing and there are more and more people buying your food. So I would not want to underestimate just the great job the China team is doing marketing and operating their brand and that -- from every measure we’ve seen, our brand tracking indicators are at all-time highs. So that’s a lot of power you’ve got working for you and I think the asset leverage plays that we’ve made at both Pizza Hut and KFC are really paying off. Everything from Pizza Hut from having proprietary beverages with the tea time and moving into the snacking occasion in the afternoon to KFC having proprietary desserts like the egg tarts, to their nine lives juice to fish to pork -- this brand stretches into a whole lot of different categories so every month, we’ve got something new we’re talking about to build on the base, so that pipeline is full and it’s robust. And I think that’s building fuel into the business. I think in the U.S., there are so many of you that follow our industry. You are probably better than I am in terms of really trying to gauge where the economy is and the impact and what the real trends are. I mean, you are looking at every business out there, Joe, and there’s probably not too many guys any better at it than you. I can only say in times like this, the biggest thing you have to be is you have to be good. And we’ve done a lot of studies. We’ve looked at recessionary periods. We’ve looked at consumer sentiment. We’ve look at a lot of things. And I think in every situation, you’d much rather operate obviously in a better environment. But what we have found historically is the brands that are positioned well, the brands that have the most news, the brands that have the best value proposition, they win, even in the toughest times. I think that we are not recession proof but I do think that we are, we have brands that can fare much better than other brands and other categories at times like these. And you know, I had a level 12 meeting -- that’s our directors and above -- meeting last week with our people and I talked about this and I think the way we look at this is we have a real opportunity to distinguish ourselves as a company in a tough environment like this by really delivering a strong U.S. year and continuing to show the portfolio power of our business in terms of China and international. You know, after doing six straight years of 10% growth with lots of different challenges over the years, we ought to put another up on the board. And in particular, we want to keep obviously our global strength and momentum going but get some momentum going in the U.S. while we establish even stronger programs for the future. We don’t believe in weather reports. We don’t believe in economic reports. We don’t believe in any of that stuff in our company. What we believe is our job is to win no matter what the environment is. Joe Buckley - Bear Stearns: Thank you.

Mitchell Speiser, Telsey Advisory Group. Mitchell J. Speiser - Telsey Advisory Group: Thanks very much. Good morning. A couple of questions, first on chicken costs. Now that 2007 is over, can you give us a sense of what your U.S. chicken costs were on a year-over-year basis, perhaps first half/second half? And as you look out to ’08, can you give us a sense of how much you are exposed to chicken costs? I know you have some costs plus arrangements and so maybe if you can address that but also, the amount of requirements that are not contracted at all. And then if I could just throw in a second, separate question -- KFC, I guess it seems to have been weak in the fourth quarter and for ’07 and I’m just wondering if KFC's average check is perhaps a bell-weather for the consumer and if you can give us a sense of if the average check was up or down in the fourth quarter at KFC. Thanks.

On the commodities, I think the one thing in looking back that we can tell you is that of the -- I think it was $44 million in the U.S. for last year, almost half of that was in the fourth quarter. So a lot of it was Q4 and even looking forward, a fair amount of the inflation we expect for 2008 will happen in the first half for sure and particularly in Q1. So that gives you a little bit of the skewing. In terms of chicken, it was pretty much level throughout the year because on chicken in the U.S., we’re typically contracted. There was some hedging that goes on based around the chicken-on-the-bone products but most of the chicken products are contracted for the year and that’s the same case going forward. When we talked about commodity inflation for ’08, we said 5% to 6% inflation. We feel pretty good about that. If you look back last year at this same time, we said 3% to 4% in the U.S. and we came in right in the middle of that range in actual terms. And the teams that we have focused on that do a pretty darn good job of looking at the market and what we have locked up and what we don’t and we end up coming out very close to those expectations. Mitchell J. Speiser - Telsey Advisory Group: Tim, just on that point, the cost plus arrangements that you have, is there exposure to cost plus? I know you are contracted but are there escalations in there?

No, the big exposure we have on -- the exposure that we have on cost plus is that as our suppliers grow out the chickens, whatever they feed them, corn and soy meal, that’s charged to us at current market prices and we hedge that through the forward commodity markets on a rolling forward four quarter basis. So there is protection against that as well. Mitchell J. Speiser - Telsey Advisory Group: Okay, thanks. And then if you can talk about my second question about KFC average check?

KFC average check for the year? Mitchell J. Speiser - Telsey Advisory Group: For the fourth quarter and year, that would be great.

There wasn’t -- we can hook up with you later in terms of more details but I don’t recall there being any significant movement in KFC check.

Jason West, Deutsche Bank. Jason West - Deutsche Bank: Thanks a lot. I was wondering, just for clarification on the guidance, if that now excludes any refranchising gains or losses for 2008. I believe the original guidance had included about $20 million to $50 million in gains on refranchising activity. Richard T. Carucci: The full year guidance excludes the 20 to 50, it excludes charges in the U.S. business related to restructuring and any investments we make in the business, and it excludes the Japan gain we expect in Q1 of $87 million. Jason West - Deutsche Bank: Okay, and you guys say in the first quarter, we’ll see a $20 million loss in refranchising? I was just wondering if you could talk about what was that one transaction that drove that loss or what was the make-up of that? Richard T. Carucci: The way the accounting works is that when you float a deal where there’s an expected loss, you effectively recognize that loss when that deal is floated. If you expect to gain then you don’t recognize that until the deal is closed. So what’s happened in the first quarter of ’08, we floated some expected loss deals, mostly Long John Silver related. Jason West - Deutsche Bank: Okay, and then last thing, on the VAT lap that you have in the Mexico business of $30 million, would that fall within the segment for YRI or would that fall within the consolidated tax rate? Richard T. Carucci: That would fall within operating profit for YRI. YRI reported numbers in 2008 unfortunately have the VAT included as a negative in their operating profit but that one-time Japan gain sits outside of YRI, and we put that in the one-timers. Jason West - Deutsche Bank: Okay. Thanks a lot, guys.

Your final question is a follow-up from David Palmer with UBS. David Palmer - UBS: Two quick ones; first, maybe Rick, outside the U.S., are you seeing any slowing in any markets anywhere in a way that feels macro? And if so, where? And then maybe Dave, your U.S. chains, we’ve talked about this before, have a larger dinner business than perhaps the hamburger chains have as a percentage of your sales. And I’m wondering, do you view that as a particular challenge for Yum!, essentially making Yum! more subject to discretionary spending pull-backs in your view and perhaps having ramifications for how much volatility we could see in light of the macro concerns this year, and perhaps how are you thinking about your 2008 marketing and innovation, is that really targeted towards defending dinner? I see it with Pizza Hut but I’m perhaps not seeing it so much with your other teams. Thanks. Richard T. Carucci: Let me take the first part. Overall our trends at YRI are very favorable, so we feel good that we are entering 2008. We entered 2008 with momentum. We’ll have the typical YRI results. I mean, don’t forget 2007 was very unusual. We had very few countries with weak results. Almost everybody was strong and we’ll probably have some countries that are up and down but I haven’t seen anything across countries that look like a macro trend. So overall, we feel we are in good shape. The one macro thing that we did talk about in December and it’s still there is we do expect to see more global inflation than we normally do but again remember, we’re a franchise business and we’re really not that susceptible to major bumps based on that. David Palmer - UBS: Okay, thanks.

I think on the -- if you look at just the dinner SKUs at Pizza Hut and KFC and just look at our portfolio in total, the value proposition that we absolutely feel the very best about going into this category is Taco Bell, because that’s half of our profits and we are ranked number one on value and just in terms of the amount of what you get for what you pay, so we have tremendous core equity there and I think we are most insulated, most insulated on the value front today at Taco Bell. Regarding dinner, it is a higher guest check but what you do see that’s going on in the category is tremendous trade-down in casual dining, so we are still very affordable at dinner versus the casual dining people, but I think the real challenge for us is to bring more compelling news to compete more effectively in that segment. And what we tried to do on the value front for dinner at Pizza Hut is to shore that up by the launch of Pizza Mia, which is not an in-and-out product but it’s every day, you can get three pizzas for $15 at Pizza Hut. So I think that gives us more strength than what we’ve had to compete more effectively at dinner for that particular occasion, while we innovate around new pizzas and bring pasta and chicken into the equation with Wing Street. So I think we’re -- you know, it’s not quite the value proposition that we have at Taco Bell but we’ve done some things to shore it up. I think our value perception at KFC is one of the biggest things that we have to work on as we look towards the long-term transformation of that business. We don’t have an every day value meal at the low end and I think that that’s not in our favor. What we are doing this year though is we are launching a line of oven-toasted products with our grill press that we think will make us much more competitive on the low-end and you’ll be seeing that. But the incremental advertising that the franchisees have approved have allowed us to do that and also reinforce our dinner occasion, so we are hoping for a more effective one-two punch. So in summary, in terms of how are we positioned from a value perspective, we think Taco Bell is in excellent shape. We think Pizza Hut is in better shape than it’s ever been. KFC is in a more difficult challenge but has taken some move on the product news front that will hopefully mitigate some of the issues. But I think the lower your entry price point is, like a Taco Bell, I think in today’s environment is better. So I think anybody in dinner does have a little bit more of a challenge. David Palmer - UBS: Thanks.

Do we have anymore questions, Luanne?

No, sir, there are no further questions at this time.

So let me just briefly wrap it up here -- I think as we look to 2008, we think our total portfolio and the improvement that we expect to show in the U.S. will give us another year of consistent EPS growth of at least 10%. You will also see a lot of global growth this year. We are going to be opening up 1,500 new restaurants around the world and finally, each of our businesses will generate free cash flow, giving us the capability to return over $2 billion to our shareholders through repurchases and dividends. Thank you very much. I appreciate you hearing our story and we look forward to reporting our results throughout the year. Thank you.

Thank you for participating in today’s conference call. You may now disconnect.