Yum! Brands, Inc. (YUM) Q1 2016 Earnings Report, Transcript and Summary

Good morning. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Yum! Brands' First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you. Steve Schmitt, Vice President of Investor Relations and Corporate Strategy, you may begin your conference. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Amy. Good morning, everyone, and thank you for joining us. On our call today are Greg Creed, our CEO; and Dave Russell, our Interim CFO. Also on today's call is Larry Gathof, Yum!'s Treasurer, and we're very pleased to have Micky Pant, Yum! China CEO on our call as well. Following remarks from Greg and Dave, we'll open the call to questions from the entire team. Please keep in mind, Micky is dialing in from Shanghai, so there could be a slight delay in some of his responses. 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 website, 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 conference call via our website. 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. We would like to make you aware of the following upcoming Yum! Investor Event, our second quarter 2016 earnings will be released on Wednesday, July 13. Now, before I turn the call over to Greg, I would like to bring your attention to two items you may have noticed in yesterday's release. First is new terminology, we reported core operating profit growth of 21% for the first quarter of 2016. Core operating profit growth is our operating profit growth year-over-year, excluding foreign currency translation and special items. Second, as previously announced, effective January of this year, the company's India business integrated its three brands into our global brand divisions. Prior year figures have been restated in the release. Now, it's my pleasure to hand the call over to Mr. Greg Creed. Greg Creed - Chief Executive Officer & Director: Thank you, Steve, and good morning, everyone. I'm pleased we're off to a strong start in 2016, with better than expected core operating profit growth of 21% in the first quarter. This includes 42% growth in our China business due to outstanding Chinese New Year results at KFC, underscoring the power of the KFC brand in China when we deliver insight-driven marketing that resonates with our customers. Company-wide, all four of our divisions posted positive same-store sales and operating profit growth in constant currency. Furthermore, we are on track to finalize the spin-off of our China business by year end, creating two powerful independent, focused growth companies. As you saw in our release, we're raising full year core operating profit growth guidance for Yum! Brands to 12% from 10% previously. Even though it is still early in the year, we are confident about the revised guidance, and will update you as the year progresses. Today, I'll give you an overview of each of our operating divisions, and then Dave Russell, our Interim CFO, will walk you through the financials. So first China. For the China Division, same store sales grew 6%, led by 12% same-store sales growth at KFC. Our KFC business, as a reminder, represents about 75% of our operating profit in China. We saw particular success at KFC during the Chinese New Year with Bucket Meals, which we tailored across four customer groups, ranging from kid's buckets to larger group meals. As a result, buckets mix had a much higher percentage than normally. This lifted average ticket as we focused more on group occasions. And we gained even more consumer insights this year, which will help our business both going forward as well as next New Year. Pizza Hut Casual Dining, which represents about 25% of our operating profit in China, remained challenging. System sales declined 1%, and same-store sales declined 12% in the quarter. A tough macro environment and competitive landscape continued to weigh on performance. We're addressing this with urgency, but realize a recovery will take time. So wrapping up on China, we're pleased with our first quarter's overall operating profit growth, which came in well ahead of our expectations. The strong margin performance reinforces our confidence in the future earnings power of this business. When we generate sales growth, profit flow-through is impressive. As Steve mentioned, Micky Pant, our China Division CEO, is on the call today and will be happy to assist in answering questions you may have on the China business. Now, turning to our three global brand divisions. In our KFC Division, same-store sales grew 1% in the first quarter or 5% on a two-year stack. Operating profit grew 7% in constant currency when adjusting for incremental advertising spend in the U.S. The division opened 79 new international restaurants in 32 countries. 77% of these units were opened by franchisees, and 71% of our new international openings were in emerging markets. I'm encouraged by our ability to generate growth in both emerging and developed markets. System sales and international developed markets grew 5% and international emerging markets grew 8%. I recently visited with the team in Canada and was thrilled to see the assets being upgraded and the marketing position around Always Original. With 6% same-store sales growth in the quarter, I would say it's working. I'm also pleased to see success in emerging markets, which are a key contributor to KFC's growth story. KFC is a franchise-led emerging powerhouse, and I'm confident the brand is getting even stronger and will produce strong growth this year and for many years to come. Pizza Hut grew same-store sales 3% in the quarter, and was led by 5% same-store sales growth in the U.S., which makes up approximately 60% of total sales. Our $5 Flavor Menu helped drive system transactions, with company stores leading the way, up 8% in the quarter. Our discipline around making it easier to get a better pizza is holistic and driving traffic. We are focused on the entire customer experience, from ordering, payment and delivery tracking, to our assets and menu. And I believe this quarter's results are further testament to our maniacal emphasis on this way of thinking. We are on track to replace over 1,300 U.S. ovens in 2016. For those stores replacing older ovens, this should result in average energy savings of 25% in ongoing operational costs and a faster cook time. From a marketing calendar perspective, we are focusing on balancing premium price innovation, such as Stuffed Garlic Knots Pizza to protect and improve unit level economics with compelling value offerings such as our ongoing $6.99 Any Pairs deal. All of this will enable us to provide our customers with a better pizza at great value. Our international business at Pizza Hut saw systems sales growth of 3% in constant currency and a 1% decline in same-store sales in the quarter. Sales were especially strong in Latin America and Canada but offset by weaknesses in Korea, Australia, and India. We are committed to offering consistent everyday value to our customers, and will leverage proven value strategies across markets with similar characteristics. We have high expectations for the international Pizza Hut business. Over the last five years, we have opened 1,200 international restaurants, and we will continue to grow this business over time. The bottom line is that we have established solid momentum with our strategy in the U.S., especially around the $5 Flavor Menu. And as we roll this overall strategy out internationally, we hope to achieve similar success. Now, turning to Taco Bell, same-store sales grew 1%, lapping 6% growth a year ago, and operating profit grew 4% in the quarter. Restaurant margins were an impressive 21%. While 1% same-store sales growth is not what we're used to seeing at Taco Bell, the timing of our key launches had an impact on same-store sales growth for the quarter. The Quesalupa, which launched in February, makes it almost 10% and drove a meaningful lift in transactions. We also launched our $1 breakfast menu in March. The $1 price point is consistent with Taco Bell's reputation as the value leader in QSR. Taco Bell's new breakfast $1 Value Menu differentiates itself from the competitors and puts it at the forefront of value in a growing daypart. We now have 10 $1 items on the breakfast menu, and are seeing breakfast sales hold at 8% and transaction growth accelerating. The Taco Bell team is exhibiting great flexibility to read and react to the competitive value pressures, and adjusted their 2016 promotional calendar accordingly to highlight even more value. Insight-driven innovation, cravable food, and breakthrough value such as the upcoming launches of the $1 Beefy Crunch Burrito and steak value later this year, should boost sales and further the brand's momentum. So, we're off to a great start at Yum! Over the past several quarters, we have really had three businesses that needed dramatic improvement: KFC China, Pizza Hut China, and Pizza Hut U.S. I'm pleased that we have been able to turn two out of these three businesses, as KFC China and Pizza Hut U.S. are on more solid footing. Now, let's be clear, we're not out of the woods on these businesses, but we've made a lot of progress and will continue to focus on delivering better results. As you heard me say before, this is a transformational year for Yum! as we finalize the spin-off of our China business, creating two powerful, independent focus growth companies. Our brand strength, unwavering focus on the customer, and innovative food offerings driven by consumer insights will allow us to grow Yum! into an even better global company. This is an exciting time and pivotal time for our company, and I look forward to what the future holds. And with that, I'll hand the call over to Dave. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: Thanks, Greg, and good morning, everyone. In my remarks today, I'll cover three areas: our first quarter results, our outlook for 2016, and an update on our planned recapitalization and a spin-off of our China business. As Greg mentioned, we are very pleased with our strong first quarter results where core operating profit increased 21%. EPS before special items grew 19%, including a five-point negative impact from foreign currency. These results were led by better than expected sales and restaurant margins at KFC China. EPS also benefited from a 5% reduction in our diluted share count compared to our first quarter last year due to our significant share buybacks over the past 12 months. I'll now take you through our results by division starting with our China business. For the China Division, overall, same-store sales grew 6% in the quarter. KFC grew same-store sales 12%, which was sequentially better than Q4, and exceeded our expectations. A successful Chinese New Year promotion drove results. As Greg said, the KFC brand in China is really powerful when you deliver insight-driven marketing that resonates with our customers. Same-store sales at Pizza Hut Casual Dining remain sluggish, declining 12% in the quarter. We are working to turn the Pizza Hut business around in a difficult macro and competitive environment. Restaurant margin improved 3.5 percentage points versus the prior year to 22.4%, helped by sales leverage at KFC, productivity initiatives, and commodity deflations, more than offsetting sales deleverage at Pizza Hut. While our first quarter is a seasonally high sales period for the China Division, restaurant margins of over 22% give us tremendous confidence in the future earnings power of this business. When we deliver solid top-line growth, the profits are impressive. One other note on China's first quarter results, we had a leap year benefit that added an additional $6 million of operating profit in Q1 to China's results. However, we pulled sales from the leap day out of our same-store sales calculation, so the extra day had no impact on our reported 6% same-store sales growth. The way our reporting calendars work here at Yum!, none of our other divisions saw any impact from leap year in Q1. Now, moving to our global KFC Division, which posted its ninth consecutive quarter of same-store sales and profit growth. Emerging and international developed markets, each grew comps 1%. The U.S. recorded its seventh consecutive quarter of same-store sales growth despite overlapping 7% comps in the first quarter of last year. Operating margins improved 30 basis points in constant currency, and core operating profit grew 4% in the quarter. Adjusting for the incremental advertising expense associated with the Acceleration Agreement we reached with our franchisees in 2015, core operating profit grew 7% in the quarter. As a reminder, the Acceleration Agreement with our U.S. franchisees, which went into effect during the second quarter of last year called for us to invest incremental media of $20 million in 2016 as opposed to $10 million last year. Our global Pizza Hut Division delivered 3% same-store sales growth for the quarter, led by 5% same-store sales growth on our U.S. business. Same-store sales growth and lower G&A expenses drove core operating profit growth of 9%. This is the best result we've seen on Pizza Hut U.S. in years, and we believe our strategy is working to drive incremental transactions. I am pleased to see momentum behind the business, and believe we can transfer our U.S. learnings to benefit the system globally. Digital continues to grow in importance to our sales, comprising 46% of U.S. delivery and carryout sales, a three percentage point increase versus a year ago. On Super Bowl Sunday alone, we took over 500,000 digital orders, representing about 50% of sales on what was an all-time record day for the business. With digital orders comes higher levels of loyalty and higher average spend, so we are investing as you would expect. Along those lines, we are making progress in migrating to a single point of sale system in the U.S. by the end of 2017, which will allow us to be more nimble as we roll out digital initiatives going forward. Finally, Taco Bell faced increased value pressure from the burger chains in the first quarter, and posted 1% same-store sales growth. Same-store sales improved throughout the quarter, and we remain confident in achieving 3% same-store sales growth for the year, with a stronger second half than first half. Despite the lower than expected full quarter sales, operating margin improved 150 basis points to 28%, and operating profit grew 4%. Restaurant margins also improved 150 basis points at 21%, and we expect full-year margins to be greater than 20% this year, albeit slightly lower than last year. On the development front, we opened 49 new restaurants in the first quarter, with 90% opened by franchisees and licensees. Of our new openings, seven were international units. We expect to open a record number of Taco Bell units internationally in 2016 as we continue to make progress in building out the unit level economics as we enter the new countries. I'd now like to shift to our 2016 outlook with our strong first quarter results and a change in China's tax laws whereby a value-added tax, or VAT, is replacing the business tax, we are raising our full year core operating profit growth forecast to 12% from 10% for Yum! For a little bit of background on the VAT, China recently announced further reform to its retail tax structure, which is intended to be a progressive and positive shift to more closely align with the more modern service-based economy. Under this reform, a 6% output VAT would replace the 5% business tax currently applied to certain restaurant sales. Input VAT would be credible to the aforementioned 6% output VAT. This change is effective May 1, 2016, so it in no way had any impact on our first quarter performance. While it's difficult to estimate the impact of this VAT reform prior to its actual implementation, Yum! China currently expects a positive financial benefit, further enabling continued investment in the business, and creating thousands of additional jobs in China. While we are raising our forecast for core operating profit growth from Yum! from 10% to 12%, we are maintaining our guidance for China same-store sales of 2% to 3% for the full year. From a modeling standpoint, there are two other things to bear in mind as you build your forecast. First, the second quarter in China, which is typically our seasonally low quarter, happens to be our toughest hurdle of the year on a two-year, three-year, and four-year stacked same-store sales basis. Second, we have an RGM convention in the second quarter that we did not have last year that we expect to cost around $7 million. It is important for you to note that these factors were fully factored into our initial guidance and our first half and full year performance is expected to exceed our expectations coming into the year. All in for Yum!, we outperformed our expectations in the first quarter, and are raising our full year guidance to 12% core operating profit growth, including the 53rd week. This takes into account the strong first quarter produced by KFC China, weakness at Pizza Hut Casual Dining, and the expected VAT benefit in China, in addition to our brand divisions continuing to produce results consistent with our initial 2016 targets. It is early in the year to raise guidance, but we feel confident given where things stand and we'll update you as the year progresses. Now, I'd like to quickly update you on our spin-off plans. We remain on track to complete the spin-off by year end. We plan on filing our initial Form-10 by early May, and conducting comprehensive road shows ahead of the separation. This spin-off will establish two unique investment opportunities, and create one of the largest U.S.-listed China retail businesses. Another key aspect of our strategy is to optimize the capital structure of Yum!. Given the significant improvement we've seen recently in the debt markets, we'd like to announce another milestone in our previously communicated plan of targeting company-wide leverage of approximately 5 times EBITDA. In early May, we plan to enter into a new financing facility of at least $2 million, securitizing Taco Bell U.S. royalties. As the next step in our plan, subsidiaries that operate our KFC, Pizza Hut, and Taco Bell's businesses, excluding the Taco Bell subsidiaries included in the securitization financing are expected to enter into a new senior secured credit facility and issue new high-yield notes. More details will be forthcoming in a separate release later today. In line with what we've previously communicated, we plan to complete our rate (19:26) capitalization and have approximately $9 billion in debt outstanding by the end of the second quarter. Finally, since we announced in October 2015 our intention to separate the China business, we have bought back 24.7 million shares at an average price of $71, returning a total of $1.8 billion to shareholders, excluding dividends. As previously announced, our recap will enable us to complete an additional $4.4 billion return of capital return to shareholders. So let me wrap things up. I'm pleased we started 2016 off with a strong quarter. We're confident we'll deliver 12% core operating profit growth for the full year, and we're proceeding as expected with the separation of our China business into an independent publicly-traded company. We're working diligently to set up both companies for future success and look forward to updating you on any progress throughout the year. And with that, I'll hand the call back to Greg. Greg Creed - Chief Executive Officer & Director: Thank you, Dave. Before we start Q&A, I wanted to provide a brief update on our plans for the China business. You may have seen recent news stories about a sale or a potential strategic investor. I want to assure you that we are fully committed to maximizing the value of our China business for the benefit of our shareholders, and we will carefully consider all options to achieve that goal. As you know, we announced in October that after careful consideration, we believe that the best way to maximize shareholder value is to spin off our China business by the end of this year, and we are making great progress towards the spin-off. We won't have any further comment on this. And with that, I'll open the call up to Q&A.

At this time, we will be conducting our question-and-answer session. Gentlemen, your first question comes from the line of David Palmer with RBC Capital Markets. David, your line is open.

Thanks. Fundamental question about China for Micky, if I may. Regarding Pizza Hut, what have you done so far, perhaps even through the second quarter to date, with regard to the menu and the marketing? I know you wanted to get back to that five-star dining at three-star prices. Have you done stuff so far? How is that working? And how has your thinking generally evolved about the timetable for a turnaround for the Pizza Hut brand? Thanks. Micky Pant - CEO-Yum! Restaurants China: Thank you, David. I hope you can hear me, because I had a bit of trouble. I'll speak slowly. First, on Pizza Hut, I just wanted to say to all of you that it is an extremely strong brand in China. All our consumer metrics, the brand image tracking that we do regularly shows that brand regard value scores, food scores are very high and they recovered fully from the crisis that we had a couple of years ago. We opened 280 new Pizza Huts last year, and new unit returns are very good. Over the last four years, we have opened 1,000 Pizza Huts dine-in restaurants alone and we dwarf the competition. So it is a very strong brand. It is true that same-store sales have been negative, but in 2015, for example, our system sales were up 10 points, and we do track through CREST in 22 cities, and also through publicly reported companies that operate in casual dining here the overall casual dining performance. And it is our understanding that we gained market share. Part of the reason the casual dining sector has been hit has been due to a decline in consumer confidence. And as we explained in December last year, part of it was on account of the fact that home delivery through aggregators was growing. This latter phenomenon has tapered off a bit on account of burnouts, et cetera. So we fully expect that Pizza Hut will turn the corner. It is a strong brand. Margin performance has been good. Our sales were minus 1% system sales in the first quarter, but our goal is to get to same-store sales positive. I cannot put a date on it, David, because the market is volatile, but we are doing a number of things. First is that we have shifted the focus back to the core menu with a lot of pizza activity. So we will have more pizza innovation in the next six months than we've had in a long time, and these have tested very well. The second, I believe, is our value scores are actually good. You can eat lunch at a Pizza Hut at just a little more than at a KFC. So there's no need for any margin compression, but we do need to communicate that value better, which we have started doing. We have clarified the brand position significantly, and we've hired one of the best celebrities in China to bring that point home. And lastly, we continue to emphasize customer service for the programs that will be presented in December. So with that, I feel much better about Pizza Hut than I did a few months ago, but of course, I'm disappointed that same-store sales are still negative. And I might also remind you, as you know very well, that Pizza Hut is about 25% of our sales and our profit. So one way to look at it is that three of the four engines that drive the Yum! China business are KFC. And with KFC performing well, I think we have the ability to sort Pizza Hut in coming quarters. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Micky. Thanks, David. Amy, next question, please.

Your next question comes from the line of John Glass with Morgan Stanley. John, your line is open. John Glass - Morgan Stanley & Co. LLC: Thanks very much. Micky, I'll keep you on the line. On KFC, you talked about the bucket promotion being an essential driver. So how much of the success in the first quarter was related just to that? And I guess related, how if it was very – if it was a successful promotion, how much of that sustains going forward? If you can talk about sustainability of those sales, maybe since we're well into April here. And can you also just – commodities were significantly deflationary this quarter. I think they are supposed to be up this year. So are you changing your view on commodities, or was this just the timing of better commodities in the first quarter but not for the year? Greg Creed - Chief Executive Officer & Director: John, it's Greg. Micky Pant - CEO-Yum! Restaurants China: Yeah, John – go ahead. Greg Creed - Chief Executive Officer & Director: Yeah, I'll just...no, no, I'm just going to jump in first and then obviously let you provide the detail. Look, first, I want to commend Micky and the entire China team for what I think is a fantastic Q1. KFC China delivered 12% same-store sales growth, and as you can see from the 42% growth in op profit, the earnings power of the business is extraordinary when sales are working in our favor. And we're very encouraged that we have now had three consecutive quarters of same-store sales at KFC China. I think, fortunately, we didn't assume and we don't need heroic numbers like this to continue throughout the year to reach our 2016 guidance of 2% to 3% same-store sales growth. And recent history shows that sales in China have been difficult for us to call. So regarding our expectations coming into the year, KFC sales were obviously much better in Q1 than we could've imagined. In Q2, we are closer to where we thought we would be for KFC as we believe that our successful Chinese New Year may have pulled forward some of our early Q2 sales into Q1. That said, six weeks into the quarter, KFC sales are slightly positive, and we're encouraged by where the business is going. And obviously, I'll let Micky speak to that in more detail. And as – we know that we've still got a lot of work to do on Pizza Hut in China and quarter-to-date, sales have remained double-digit negative. But again, as Dave mentioned, our Q2 laps at both KFC and Pizza Hut's more difficult, especially when you look at these multi-year stacks. We feel great about the start to the year. We're confidently raising our guidance. We still expect China full year – China Division same-store sales to be in the 2% to 3% range, which is consistent with our expectations. So with that, I'll just let Micky take over. I just wanted to compliment Micky and the team for a job well done. Micky Pant - CEO-Yum! Restaurants China: Thank you, Greg. I think, John, there were some factors that were unique to Q1 and that is to do with the Chinese New Year. It was the Year of the Monkey, and we were fortunate that the – actually, it was not just fortune, but the team of KFC has really hit their stride. So Joey Wat, who is a very accomplished retail executive, has now really understood the rhythm of the KFC business. And they put together sort of a one, two, three punch around the Chinese New Year, extending it from the traditional 10 days to about four weeks, centered around a very powerful bucket promotion. But also then with activity afterwards featuring a grilled sandwich, which was good thinking, because after a heavy Chinese New Year, people are looking for a healthier fare. So that aspect is unique to the Chinese New Year, and I think it was a spectacularly successful promotion. Somebody asked me how we will ever lap that next year, and I think the one bit of good news we have is next year is actually the Year of the Chicken, so we started work already on the sort of promotion that we will be running. But some of the factors that worked in Q1 actually give me encouragement for KFC overall. The first is the success of selling our core products: fried chicken, hot wings, french fries, egg tarts, and all the familiar favorites in China. And we are extending that principle by doing more activity around buckets in the back half of the year, and also introducing Box Meals, which are a proven international success where you can buy fairly good – just like a little bit more money, but significantly more product. As you can imagine, following a very large success in January and February, we hit almost record volumes in the amount of chicken that we did sell, and also that sale was accompanied by corresponding traffic growth. The ticket impact on our sales of plus 12% in Q1 was about 3%. So it wasn't as though the – sorry, the pricing impact. It wasn't as though we took pricing to get there. The price impact was only plus 3%. The rest of it was on account of the fact that party sizes for these large buckets were very large, and also there was a significant increase in the number of items bought per person, because the promotion was very well run. In Q2, we're about halfway through the quarter. The pleasing thing is that KFC is positive. But as Greg said, there's a lot of volatility around it. It's a difficult quarter because we've got tough laps. We've had some expenses. Our goal as a team here is to make Q2 this year the fourth consecutive quarter of positive KFC same-store sales. But I cannot say that that's a guarantee until we have more visibility. But the fact that the flow-through was very strong in profit terms, the simplification of the menu boards, which was well conducted, the strength of the marketing calendar in the back half gives me and the team a lot more confidence that we had six months ago. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Micky. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: First, to further what Micky said a little bit, too – the timing of Chinese New Year, with it being a little bit earlier this year, did provide a slight benefit to Q1 which will be a little bit – hurts Q2 a little bit. So that was a little bit on the sales line. As far as your commodities question, John, we saw a 2% decline in commodities in China during the first quarter. And we are still on our forecast for plus 1% for the full year. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, John. Amy, next question, please.

Your next question comes from the line of Joseph Buckley with Bank of America. Joseph, your line is open.

Hi. Thank you. You gave a little bit of this in answer to the last question, but could you talk about traffic versus price versus mix for both KFC China and KFC Pizza Hut during the quarter? Steve Schmitt - VP-Investor Relations & Corporate Strategy: Yeah, Joe, it's Steve. For the division, we had about – for the 6% comp for the division, we had nine points of check growth and a three-point decline in transactions overall.

Okay. Presumably, though, positive transactions at KFC? Steve Schmitt - VP-Investor Relations & Corporate Strategy: That's the number for the division. Micky Pant - CEO-Yum! Restaurants China: Yes, we had positive transactions at KFC. And as I said that the transaction number as we measured it is the number of tickets we cut in the store. But as I explained, the size of the ticket was bigger on account of shareable meals, principally the bucket. So we estimate that the price impact on our sales was about 3%, and the rest of it was on account of traffic plus a larger check on account of more items being bought. So it was a fairly healthy growth.

Thank you. And then just switching topics for a moment, Pizza Hut U.S. numbers look pretty good. Pizza Hut international slightly negative. Can you talk a little bit about Pizza Hut international, and what's going on there, and what changes you can implement there? Greg Creed - Chief Executive Officer & Director: Yes, certainly, Joe. I think the good news, as you said, is Pizza Hut U.S. had an excellent quarter, same-store sales up 5%, company transactions were up 8%. I think a combination of the $6.99 Pairs and the $5 Flavor Menu have certainly worked. And obviously, what we're doing now is in the process of taking that success and all the tactics that are associated with that and expanding that rapidly on a global basis. So like all things, this business is very much driven by our U.S. success, and I think what we're doing now is in the process of rolling out that U.S. success and taking it around on a global basis. I happened to be in Thailand, actually in January, earlier in the year and you can see already that that team was starting to take the successful tactics that were working and start to see how we can implement those in that country. And that's happening around the world. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Joe. Next question, please, Amy.

Yes. Your next question comes from the line of John Ivankoe with JPMorgan. John, your line is open.

Thank you very much. Two unrelated questions, if I may. First one for you, Micky. For a number of years now, labor costs, labor dollars per operating week in China have been a pretty major contributor to margins. As you do plan to re-grow customer traffic, obviously, in the segment and want to stay competitive with wages, are we at the point now where labor starts to inflect the other way, and adding back costs into the system that have been taken out over the last several years? Micky Pant - CEO-Yum! Restaurants China: Well, it's true that over the last five years labor has inflated in China on account of minimum wage increases by the government. But we've seen a moderation of that. I think the authorities recognize that the economy has to be supported, so I think we're seeing a more reasonable picture there. What we did get in the quarter particularly was some good productivity gains on account of using more part-time and student labor, which is a phenomenon that did not exist in China in the long past, and that is making a difference. So looking forward, it's always a risk, but I don't see labor price inflation as being a significant risk. I think the key for us is going to be product innovation, sensible pricing, and get traffic scores back. So I hope that helps.

Okay, thank you. And then secondly, I thought the commentary on the capital structure was interesting in that part of the new capital structure is going to be a royalty securitization only to Taco Bell, which I don't think your previous debt actually assigned itself to individual brands. So I just wanted to understand the symbolism behind the debt security that's only related to Taco Bell. And could people's imagination start to think that Taco Bell doesn't necessarily remain a part of Yum! over the long-term if an opportunity arises? W. Lawrence Gathof - Treasurer & Vice President: Hi, John, it's Larry Gathof. I'll answer the debt aspect of it anyways. But what we're doing is we're trying to take advantage of the debt markets in total. So we're looking at doing both a securitization, bank and bond debt. So we're putting debt across all the different avenues to again get the best pricing and optimize our balance sheet. The Taco Bell securitization is only going to be on the U.S. Taco Bell franchise and license fees. So it's just that part. The rest of the Taco Bell business will also be part of the other borrowings. So again, the securitization market, quite honestly, isn't deep enough to do any one of our entire businesses. So we just peeled off the piece that we thought was most appropriate for a securitization and are accessing that market. And then again, we'll have the balance of the borrowings across all three brands after that's completed. Greg Creed - Chief Executive Officer & Director: So, John, to put it bluntly, I wouldn't want anyone to take away any thinking that we're going to be doing anything to Taco Bell, other than love it as a part of the portfolio, love its growth, love its profit contribution, and love that it is a brand that we can take global.

Thank you. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, John. Amy, next question, please.

Your next question comes from the line of Keith Siegner with UBS. Keith, your line is open.

Thanks. Greg, just a question for you, having come from the Taco Bell brand and having watched that brand be one of the leaders in terms of overall digital engagement, mobile ordering and more, where do you – how do you feel about the rest of the U.S. portfolio and positioning now? Are you making the progress you want? Is Pizza Hut becoming more of a leader in its categories? Is KFC also coming along? And then what about tests on delivery for other brands like home meal replacement for KFC and even for Taco Bell. Is the rest of the U.S. portfolio catching up to Taco Bell? Where do we stand? Thanks. Greg Creed - Chief Executive Officer & Director: Keith, good question, and I would say yes. I think the great thing is we can codify what makes Taco Bell successful; and obviously the other two brands can obviously track with what they've done and obviously attempt to replicate it, but in their own brand voice. So I'm very pleased with the progress that Pizza Hut's making. I think its positioning around making it easier to get a better pizza, I think not only the sales growth but the transaction growth that we just got. Obviously, part of making it easier was to get our value better on Pizza Hut, which we've done. But I think you – as we also said on the call, we are investing in technology. We do need to get from nine POS systems down to one POS system. But as we also said, 46% of our delivery carryout sales are digital and that's growing. So I do think we're making good progress there. On the KFC side, I think the Always Original positioning, the move back to Finger Lickin' Good, the great thing about KFC in the U.S. is it's the brand that's now being talked about. And I think for a long time it wasn't on anyone's radar screen, so I'm very comfortable. I think the launch of Nashville Hot has really helped. Obviously, there is a value game being played by the burger boys because of beef pricing; but I think the return to $5 boxes has been a good move by the KFC team. And then for Taco Bell, yes, the answer is I think we're now in 500 stores doing delivery in a couple of the key cities, Los Angeles, San Francisco, Dallas. I'm not quite sure where else, but – so that's been expanded. And I think if you just take the overall concept of easy beats better, which I know the Pizza Hut team originated, but what it basically says is yes, we've got to find ways to make it easier for our people, for customers to get to our brands. We do that two ways: we build more units, but we also obviously will start looking at delivery as a way to get our food to customers in their home. So very good question. We're making progress. The other brands, I think, are moving to where the Taco Bell brand strength is. A lot of work to be done, but I think we're moving in the right direction. I'm encouraged by that. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Keith. Amy, next question, please.

Your next question comes from the line of David Tarantino with Baird. David, your line is open. David E. Tarantino - Robert W. Baird & Co., Inc. (Broker): Hi, good morning. My question is on the guidance for the year. And I was wondering if you could provide some additional detail or insight on what you're assuming for China profit growth for the year in that guidance and maybe also the margin that you expect to deliver in that business for the full year. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: Sure. So, the first thing I'd say is if you're going to have a good quarter at Yum!, you want it to be the first quarter of the year, which is what we certainly did and had a blowout quarter in China. So when we looked at that first quarter, as well as some of the other – the tailwinds we have in the business with regards to the VAT we talked about earlier, though, it's very difficult to quantify the benefit, we know there's something there, some of the commodity deflation that we're seeing, we felt very confident that even with some of the other headwinds we're facing, particularly Pizza Hut Casual Dining in China, of getting to a number that was up 12% for the year. As we said, we have not yet – we have not adjusted the same-store sales forecast for the balance of year for China. It's just too difficult to call given we're only three and a half months in. But at this point, we feel very comfortable with the 12%. Greg Creed - Chief Executive Officer & Director: I mean the way I look at it is to raise guidance in the first quarter demonstrates a degree of confidence we've got in the year. As we said, there will be some puts and calls as the year unfolds, no doubt; but we felt confident in raising it from 10% to 12%. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: And you asked specifically about the margins in China. Given they are so dependent upon sales, we're still thinking somewhere along – we're not coming off our guidance from the beginning of the year around 16% at this point. David E. Tarantino - Robert W. Baird & Co., Inc. (Broker): And I guess – if 'm still on, I guess if the margin guidance still is around 16% for the year, I guess I'm a little confused on that, given the over-performance in Q1. Was there something that changed about the outlook for the last three quarters? Or is this some level of conservatism that you're baking in or perhaps... David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: No, I don't think so. I don't think we're thinking about it necessarily in that level of detail. I think we're saying it's just too early. We're off to a great start. With the Q1 success that we had, we feel very good with the 12%. But I don't think you should be reading that into the balance of your forecast. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, David. Amy, next question, please.

Yes. Your next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey, your line is open.

Great. Thank you very much. Two things. Just one, I was hoping to get a little bit more color from Micky on the China side. Obviously, with the short-term strength, which seems to be attributed to the New Year's promotion, just wondering how, in your mind, you perhaps separate that from the longer-term recovery efforts? Just it seems like you're confident that the brand, I think, you said has really turned. But then it seems like maybe in March and in April things have really eased. So I'm just wondering how you think about the business over the next 12 months in terms of just short-term spikes because of promotion versus the long-term trajectory improving. And then I had one follow-up on Taco Bell U.S. Micky Pant - CEO-Yum! Restaurants China: Yeah, well, thanks, Jeffrey. Like I said, I think the team and myself are feeling very much more confident. We just this week had all of our store managers, so we had a stadium in the city of Dalian with 8,000 people talking about the theme for the future, which is From Strength to Strength. And in particular, when the KFC section was discussed and we put out plans for the rest of the year and the positioning and the proposed marketing, there was just an unbounded confidence. So I feel that – I really feel the brand is making a lot of progress. It is much stronger. I think the positioning is very clear. The calendars are strong. We are doing sensible things around the core of the brand. We've already cleaned up the menu boards. We will do that even more. We're introducing proven international winners. I think you always have to be cautious when you come to China, because there is economic volatility, and there is also unexpected twists and turns. So there is nothing hidden; it is not as though we are worried about some specific event or there is something happening that causes us to worry. But you just want to be cautious. We've had two years or three years of a lot of volatility. So the way we are looking at it right now is it's a show me, don't tell me sort of story. And we're hoping quarter after quarter to improve and strengthen the business. I think it's been mentioned a number of times Q2 is going to be a difficult quarter on account of a variety of factors. But we are very focused on seeing whether we can deliver positive same-store sales and take it from there. So, on KFC I feel confident. I feel that the brand is making a lot of progress. The other thing we didn't talk about today is that we've spent a lot of energy and are going to be taking very good care of store refurbishment. We have good designs, we've got good plans for aggressive refurbs of some of our older stores. We are opening a symbolically important 5,000th store in Shanghai, which is, I think, maybe the best KFC in the world. It's a state-of-the-art green store which will open next week. So I think the brand is making progress on every front. On Pizza Hut, like I said before, I am very disappointed at negative same-store sales. And I don't see any reason why we cannot turn it around. There is no intrinsic reason. All our scores are good; our competitive position is fantastic. There really is no international competitor with the name. And in addition to the 1,500 dine-in stores we've got about 300 delivery units which dwarf the competition. So I feel the brands are really genuinely making progress. It's just that it's been two months – the first quarter was two months. And to make a call on the rest of the year knowing what we've seen over the last three years seems to be out of the bounds of what we should be doing. So that hopefully gives you some context on the way we're looking at it.

For sure. And then just, Greg, I just wanted to follow up. Greg Creed - Chief Executive Officer & Director: Yeah.

You made a comment about the Taco Bell U.S. It seems like maybe it was a little light of your internal expectation, which I think you attributed to maybe some of the QSR burger competitors taking advantage of favorable beef. So I'm just wondering, just to get a better understanding of your response, does it seem like getting more aggressive presumably on value? I know you've obviously been with the brand for a long time and gone through these phases before. But just the idea that you'd progressively pursue the discounting versus staying the course with your initial plan, just trying to get your thoughts. Greg Creed - Chief Executive Officer & Director: Sure, Jeffrey. I think the first thing I want to do is just correct it. Apparently in my prepared remarks I think I said the breakfast mix was 8%; it's actually 6%. The 8% is actually the transaction growth that we got in breakfast in Q1, so I just want to clarify that. By the way, I'm very happy with 8% transaction growth in breakfast with one of our competitors doing All Day Breakfast. So let me just say that. So to answer your question, yes, we had tied the launch of the Quesalupa to the Super Bowl. I tried to get the Super Bowl brought forward a couple of weeks because that would have really helped us, but unfortunately the NFL wasn't going to play along. So we were so tied up to the launch with that event that there was a couple of weeks where we were a little naked, I would say. And so obviously, sales and transactions up to there were soft. The good news is that after that event, the Quesalupa has mixed at over 10% and has done well for us. But I think even more importantly Brian, who is doing a great job leading the brand, he and the team have already changed the calendar and in fact, today, we will launch some new $1 items into the marketplace. There have been a number of revisions to the calendar. So I think we can still be an incredibly innovative brand, a socially conscious brand, led by digital. But we can also just get our value so it's more than competitive in the marketplace. I think talking to Brian the other day, he and I still have a lot of confidence we'll deliver the at least 3% same-store sales growth for the year at Taco Bell. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Jeff. Amy, next question, please.

Your next question comes from the line of Howard Penney with Hedgeye Risk Management. Howard, your line is open.

Hi. Thanks very much. I was wondering if you could help me with the Chinese culture and what the zodiac calendar and chicken means next year in terms of what that asset potentially could do for business. Thanks. Micky Pant - CEO-Yum! Restaurants China: Yeah. I don't think it is a very serious factor, frankly. The Year of the Dragon and the Monkey are particular significance. Every year is important. One interesting feature that Joey and the team put together was they actually introduced a Christmas Bucket in 2015 December which was reasonably successful, so they are dialing that up. So I think the point really is that if you do a good bucket-oriented calendar in December for Christmas and then Chinese New Year next year, we can look to a good performance. The success of the Monkey – the Year of the Monkey promotion has shown to us the importance of choosing the character well, the toys that go with it, the kids meals that accompany it, which will all help us to build for the future. And I think the Year of the Chicken does help. There is no better authority on chicken than KFC. But I don't think it's going to be culturally that significant that people have to eat chicken in the Year of the Chicken or something like that. So it's a help. And all I was saying was that to lap this very successful Year of the Monkey promotion, that's one little gift on our side.

Okay, and if I could ask... Steve Schmitt - VP-Investor Relations & Corporate Strategy: Go for it.

Sorry. Thank you. So, Greg, nine months ago, obviously, the quarter wasn't as strong as you would have hoped. And then we go through the process of you spinning out the China business and talking about the change of the structure of the company and now nine months forward things look a lot better. I was wondering if you could maybe put tangible evidence around an intangible question. And that is, what the changes internally to the employees of Yum! and Yum! China have done to help turn the business around? I don't know if I'm asking that correctly, but I think part of the reason for doing this spin was maybe to focus on the different assets. And this obviously was a fantastic quarter and for all those reasons – maybe some of those reasons – I'm struggling to ask the question properly. Greg Creed - Chief Executive Officer & Director: That's all right.

But just wondering if some of them – thank you. Sorry. Go ahead. Greg Creed - Chief Executive Officer & Director: Howard, I'll have a go. I think I couldn't be happier to have Micky leading the team. Micky has an enormous amount of just experience, has the confidence of all of us, and did an amazing job running our international business for such a long period of time on all three brands. So I've got a leader in there who I have the utmost confidence in and who has rallied the team in China. We've got great people leading the brands, Joey and Peter. They are just – they're really – I think I was there in March looking at the plans, looking at what they've learned from the lessons. Our culture is alive and well in China. So the whole recognition culture and our belief that culture fuels results, I think, was absolutely evident. And I think at the same time, what's also happening in the whole business is that we're getting much better at brand building and strengthening our brand positioning. And so I think China – I would say the words aren't exactly always original; I thinks it's: be your true self. But they pretty much resonate. We've now got this brand on a global positioning so we can leverage things. Micky has reached out and taken things like the $5 boxes that have been incredibly successful in a number of markets. As he said, they will go into the market soon in China. The Pizza Hut team is looking at a new positioning for Pizza Hut. And as Micky said, I think focusing on the pizza and less on the more and getting back to the core will help that brand as well. So I would sum it up as new leader, great leader, fresh perspective, great team, more global alignment, and a real focus on brand building, all underpinned by our fundamental belief that we leverage culture to fuel results.

Thanks. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Howard, thanks. Next question, please, Amy.

Your next question comes from the line of Brian Bittner with Oppenheimer & Company. Brian, your line is open. Brian J. Bittner - Oppenheimer & Co., Inc. (Broker): Thank you. Thanks a lot. I just want to ask a question on Taco Bell. You did roll out your pretty aggressive $1 breakfast menu in March you said; so it didn't really impact the full first quarter. Can you just talk about how this is impacting the overall business? Is it accretive to your sales trends? Is it doing what you expected it to do? And externally, us looking at the margin, how should we think about how this impacts the food margin going forward or the COGS margin? Greg Creed - Chief Executive Officer & Director: Well, I think the good news, as I said, we had 8% transaction growth in the breakfast daypart in the first quarter before we really got a full impact of the $1 menu. So, I think we feel really good that that's going to continue to have an impact on our breakfast business. Our food and paper costs for breakfast are in line for the balance of the business. So whether it grows or grows faster or slower doesn't really impact the overall food and paper costs. The good news is, obviously, Taco Bell is benefiting from the price of beef right now, and that's obviously why you're seeing in the marketplace a lot of value by both the burger chains and why Taco Bell can play an aggressive play in beef as well. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: I would just add, Brian, that at 6% mix, the breakfast doesn't change the overall Taco Bell story much. Greg Creed - Chief Executive Officer & Director: Yeah, yeah. I think the good news is it's growing. It's growing in the face of us being focused. We're doing the right thing, which we have got innovative products, we've got value now in that category, in that daypart. And I feel really good. I was out in restaurants in the U.S. just recently, visited Taco Bells for breakfast, got great food, and had a great experience. And I think the general feeling is that this is something we're going to invest in for the long-term. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Brian. Amy, next question, please.

Your next question comes from the line of Andy Barish with Jefferies. Andy, your line is open.

Thanks. Yes, just a quick follow-up on that and then one other quick one. On the Taco Bell margin maintenance in terms of your guidance for the year, even with a more sharpened value focus, is lower commodity cost really the primary reason you feel confident in that still? Greg Creed - Chief Executive Officer & Director: Well, I think two things. I do believe we'll deliver at least 3% same-store sales growth for the full year. So obviously, we got off to a slower than expected start. But as we said, we are rolling out the big numbers, plus 6%. But in the discussions I've had with Brian, he still feels very confident. So I think we're confident we will deliver the same-store sales growth that we're (54:15) in the U.S. and obviously commodities are favorable, and I think all signs are that certainly beef will stay favorable probably through the balance of 2016.

And then just quickly on emerging markets at KFC, I know you called out a couple of Pizza Hut markets. That number was only up 1%. Is there any specific country or area that was a little softer this quarter? Greg Creed - Chief Executive Officer & Director: Look, I think that when you're in 120 – 130 countries, I always – I'm never quite sure how many countries we're in on any one day, I think the good news is we had – in 130 countries, you're going to have some up markets and some downs. India was minus 1% but Russia was plus 27% in system sales for KFC. We also had strong developed markets. Australia delivered another really good quarter. They were plus 5%, which – if you think about what they've been rolling over. So we were soft in a number of places, but there is also real signs of real strength both in emerging and developed. And I think that Roger Eaton and the team believe that they also can obviously get sales up into at least the 3% same-store sales growth number for the year. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Andy. Next question, please, Amy.

Your next question comes from the line of Karen Holthouse with Goldman Sachs. Karen, your line is open. Karen Holthouse - Goldman Sachs & Co.: Hi. Thank you for taking the question. So, a question on China that's actually not on comp sales but on new store productivity. It looks like there is still a growing gap between comp growth and average weekly sales growth. And just curious if you could comment on that. Is it being driven by one of the two brands, units in one area or another? And any sort of update on how to be thinking about unit economics per year because I think the last disclosures we have really only go through like 2014. Thanks. Micky Pant - CEO-Yum! Restaurants China: Okay. Karen, what were you quoting as the reason why you had that feeling? Karen Holthouse - Goldman Sachs & Co.: That if you look at overall store productivity growth, so just sales per unit versus comp growth, it looks like the gap between those two numbers is still getting wider. Micky Pant - CEO-Yum! Restaurants China: I see. Well, when we look at our performance by peers, it's pretty consistent. So I don't think there's a particular factor there. And I really can't at the moment think of a particular reason. That certainly has not struck me that the new units that we are building are in any way have inferior economics or any such. It's not as though we're building necessarily smaller units. It is true that we built more stores in smaller cities, but our comp sales growth across peers has been fairly consistent. We are experimenting with multiple store formats to take into account the fact that there is still a very rapid build-out in infrastructure in China. So we're expecting – very large number of malls are already under construction; the high-speed rail network is being expanded. And then in China, unlike the U.S., there is not the phenomenon at the moment of highways with drive-throughs or the rest stops, and all those are being developed. I don't really see the character of our productivity per unit changing in the years to come. I think worldwide there is a trend to what we call small box, which is because in-lines are becoming more popular in mall stores, et cetera. So there may be in the longer term a slightly smaller format unit. But China is not that impacted, because we hardly have any drive-throughs here. You hardly have any drive-throughs at all, so most of them are in-lines anyway. So maybe we need to think about this question a little more. But we don't intrinsically see any reason why the sort of growth we've enjoyed should not be projected long-term into the future. Karen Holthouse - Goldman Sachs & Co.: All right. Thank you. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Karen. Next question, please, Amy.

Your next question comes from the line of Jason West with Credit Suisse. Jason, your line is open. Jason West - Credit Suisse Securities (USA) LLC (Broker): Yeah. Thanks, guys. Two questions. One, if – Micky, I'd love to have your thoughts now that you've been over in China for a while on the idea of franchising certain brands or markets or stores in China. Just your outlook and thoughts there. And then secondly, Dave, could you walk through again the math or the reasoning behind the VAT change and how that impacts the business and why you think it would be positive? It would be helpful just to understand that a little bit better. Thanks. Micky Pant - CEO-Yum! Restaurants China: Okay. So, the VAT question I will leave to Dave. I don't know, Dave, whether you want to take that first or... David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: No, go ahead, Micky. I'll go second. Go ahead, Micky. Micky Pant - CEO-Yum! Restaurants China: Okay. And just remind me, sorry, your first question was? Jason West - Credit Suisse Securities (USA) LLC (Broker): Just your outlook for franchising in China. Would you like to convert more company stores to franchise, yeah? Micky Pant - CEO-Yum! Restaurants China: Yeah, right. Sorry. Right, yes. Right. Well, at the moment, as you know, we have stayed at about just over 7,000 stores. About 10% are franchised and 90% are equity. I think at the moment as long as we have – and the way we never chase a number of stores that we have to build. But when we get new trade zones opening and opportunities that make commercial sense, and there's a very disciplined process for capital allocation and measuring new unit returns, we have a lot of surplus capital, as you know, in China. All the stores here have been built with Chinese-generated capital. There is no intrinsic reason why we would want to give that up to franchisees. The two reasons why we do expect, however, franchising to up marginally is, firstly, there are regions of the country where it makes sense for franchisees to operate. We recently opened in the autonomous region of Tibet, our first store in Lhasa, Tibet. And for a variety of reasons, including difficult operating conditions and local market knowledge, that was given to a franchisee. And that's been successful and I think that will grow. So there are parts of the country where we will do it for reasons that it makes sense to do it that way. And the other is that there will be opportunities to do franchising, for example, with gas station chains, et cetera. And for those technical reasons the percentage of franchising might go up from 10% to maybe 15% or something in the foreseeable future, but we don't expect a significant change in there. And of course, if we do not find the ability to invest our capital in productive equity investment, sure, we'll look at franchising more actively. We are not – at the moment, we are agnostic to whether it's franchising or equity, frankly. But both have advantages. Franchisees can – obviously, they're capital light and also they're very innovative. But at the moment, with the capital that we have, especially as we become independent, I think it will be a good use of the capital to continue to invest. China is a growth market the way we see it, and we still have the vision of doubling or trebling our store base. So that's the way we're looking at it. So I would say the franchising percentage will edge up, but it will not be a game changer in our business. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Micky. Dave? David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: Okay. So, on the VAT, so currently, China is paying 5% of all their sales in the form of a business tax to the government. What's happening now is China is moving to a more traditional VAT regime, which is similar to the regime in many other parts of the world, where we will pay 6% of those top-line sales to the government; but we'll get a credit for some of the inputs that we have into our P&L, commodities, utilities, rent, against that 6% credit. What's difficult for us to say right now is exactly how that those credits are going to accumulate and what exactly is going to be creditable. And we are working through that. As you can imagine, with 6,000 stores this is going to be a monumental effort. And there is also some lack of clarity around the rules at this point, still. So we're going to have a lot more for you in July. We'll have one month worth of this in our Q2 results – the benefit in our Q2 results and we'll be able to quantify it in much more detail at that point in time. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Jason. Next question, please, Amy.

Your next question comes from the line of Andrew Charles with Cowen & Company. Andrew, your line is open. Andrew Charles - Cowen & Co. LLC: Great. Thank you. Micky, as you saw success with an operationally simple promotion at KFC in the first quarter, I realize Pizza Hut is not as time-sensitive of an occasion, but there are opportunities to implement better operational practices of that brand particularly around the breadth of the menu? Micky Pant - CEO-Yum! Restaurants China: Yeah, absolutely, Andrew, there are. I think the menu is complicated. I think I had mentioned this in December as well. It's a tabbed menu. You actually have – it's a very large number of pages. It's a book. It's a little difficult to navigate, so simplifying that is a priority. Pizza Hut is celebrated and known for the variety of menu here, so we do not want to lose that. But at the same time, I think we can make it far more controlled. It also speeds up service. And table turns are an issue at Pizza Hut at peak times. So for those reasons, we are rationalizing the menu. We are also, like I said earlier, pointing out the great value that we have through lunch combos and other offers. So we are redesigning that part of the menu as well. And lastly, I'm constantly amazed at how advanced China is digitally. It's got twice the number of cell phones, smartphones, as the U.S. population. And even in our offices, people go up and down the elevator to go to lunch, they're looking up where the offers are available and where they can book a table, et cetera. So the action is shifting very rapidly to mobile devices, and both the menu as well as digital marketing is becoming very significant. So we're working on that. The good news is that for both our brands we are in a leadership position when it comes to that whole digital interface, cashless payment, et cetera. But to your question, yes, I think the operational simplicity at KFC, making it easier for consumers to choose our best-selling products and the general philosophy that the menu should not be a – it should be used more as guiding customers to our best-selling products than to give open choices, which they get confused about is something that is applicable at Pizza Hut as well. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Micky. Thanks, Andrew. Amy, we have time for one more question, please.

Gentlemen, your last question comes from the line of Brett Levy with Deutsche Bank. Brett, your line is open.

Good morning and thank you. Can you guys provide us with a little bit of an update on how you're thinking about the re-franchising efforts in terms of cadence across the divisions? How we should be thinking about it over the next six months to three years out. Thank you. David Eric Russell - Interim CFO, Vice President-Finance & Corporate Controller: Sure. So, the plan is still to be 96% franchised by the end of 2017, which that will include the China units, post-spin. This year, more of what's going to get done are the U.S. re-franchising, which is going to be KFCs and -- I'm sorry, Taco Bells and to a lesser degree Pizza Hut. We would expect significant gains in those regards. Quite frankly, selling some of the international markets is a little bit more difficult, so that will take a little bit more time. We expect that to be more 2017 loaded. Steve Schmitt - VP-Investor Relations & Corporate Strategy: Thanks, Brett. Greg Creed - Chief Executive Officer & Director: Thank you, Brett. Greg Creed - Chief Executive Officer & Director: Okay. So, I just want to thank everyone for being on the call. Obviously, we're pleased we're off to a strong start in 2016, that we've raised full-year core operating profit guidance to 12% from 10%. I also want to thank Micky, Larry, and Dave for joining Steve and I on the call today. So thank you all, and look forward to catching up with you in the near future. Thank you.

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