Kentucky Fried Chicken 2004 Annual Report Download - page 62

assets฀each฀reporting฀period.฀Subsequent฀to฀the฀recording฀
of฀ the฀ impairment฀ of฀ the฀ A&W฀ trademark/brand฀ in฀ 2003,฀
we฀began฀amortizing฀its฀remaining฀balance฀over฀a฀period฀of฀
thirty฀years.฀While฀we฀continue฀to฀incorporate฀development฀
of฀the฀A&W฀trademark/brand฀into฀our฀multibranding฀plans,฀
our฀decision฀to฀no฀longer฀operate฀the฀acquired฀stand-alone฀
Company-owned฀ A&W฀ restaurants฀ is฀ considered฀ a฀ factor฀
that฀limits฀its฀useful฀life.฀Accordingly,฀we฀are฀amortizing฀the฀
remaining฀balance฀of฀the฀A&W฀trademark/brand฀over฀a฀period฀
of฀thirty฀years,฀the฀typical฀term฀of฀our฀multibrand฀franchise฀
agreements฀including฀renewals.฀We฀continue฀to฀believe฀that฀
all฀of฀our฀other฀recorded฀trademark/brand฀assets,฀including฀
the฀LJS฀trademark/brand,฀have฀indefinite฀lives.
Amortization฀expense฀for฀definite-lived฀intangible฀assets฀
was฀$8฀million฀in฀2004,฀$7฀million฀in฀2003฀and฀$6฀million฀
in฀2002.฀Amortization฀expense฀for฀definite-lived฀ intangible฀
assets฀will฀approximate฀$8฀million฀in฀2005฀and฀2006฀and฀
$7฀million฀in฀2007฀through฀2009.
ACCOUNTS฀PAYABLE฀AND฀฀
OTHER฀CURRENT฀LIABILITIES฀
NOTE฀13
฀ ฀ 2004฀ 2003
Accounts฀payable฀ $฀ 414฀ $฀ 393
Accrued฀compensation฀and฀benefits฀ ฀ 263฀ ฀ 257
Other฀current฀liabilities฀ ฀ 483฀ ฀ 507
฀฀฀฀ $฀1,160฀ $฀1,157
SHORT-TERM฀BORROWINGS฀AND฀LONG-TERM฀DEBT฀
NOTE฀14
฀ ฀ 2004฀ 2003
Short-term฀Borrowings
Current฀maturities฀of฀long-term฀debt฀ $฀ 11฀ $฀ 10
Long-term฀Debt
Senior,฀Unsecured฀Revolving฀Credit฀Facility,฀฀
฀ expires฀September฀2009฀ ฀ 19฀ ฀ —
Senior,฀Unsecured฀Notes,฀due฀May฀2005฀ ฀ —฀ ฀ 351
Senior,฀Unsecured฀Notes,฀due฀April฀2006฀ ฀ 200฀ ฀ 200
Senior,฀Unsecured฀Notes,฀due฀May฀2008฀ ฀ 251฀ ฀ 251
Senior,฀Unsecured฀Notes,฀due฀April฀2011฀ ฀ 646฀ ฀ 645
Senior,฀Unsecured฀Notes,฀due฀July฀2012฀ ฀ 398฀ ฀ 398
Capital฀lease฀obligations฀(See฀Note฀15)฀ ฀ 128฀ ฀ 112
Other,฀due฀through฀2019฀(6%฀-฀12%)฀ ฀ 79฀ ฀ 80
฀฀฀฀ ฀1,721฀ ฀2,037
Less฀current฀maturities฀of฀long-term฀debt฀ ฀ (11)฀ ฀ (10)
Long-term฀debt฀excluding฀SFAS฀133฀adjustment฀ ฀1,710฀ ฀2,027
Derivative฀instrument฀adjustment฀under฀฀
฀ SFAS฀133฀(See฀Note฀16)฀ ฀ 21฀ ฀ 29
Long-term฀debt฀including฀SFAS฀133฀adjustment฀ $฀1,731฀ $฀2,056
On฀ September฀ 7,฀ 2004,฀ we฀ executed฀ an฀ amended฀ and฀
restated฀five-year฀senior฀unsecured฀Revolving฀Credit฀Facility฀
totaling฀$1.0฀billion฀which฀matures฀on฀September฀7,฀2009฀
(the฀ “Credit฀ Facility”).฀ The฀ Credit฀ Facility฀ serves฀ as฀ our฀
primary฀bank฀credit฀agreement฀and฀replaced฀the฀$1.0฀billion฀
Senior฀Unsecured฀Revolving฀Credit฀Facility฀that฀was฀sched-
uled฀to฀mature฀on฀June฀25,฀2005฀(the฀“Old฀Credit฀Facility”).฀
The฀Credit฀Facility฀is฀unconditionally฀guaranteed฀by฀our฀prin-
cipal฀domestic฀subsidiaries฀and฀contains฀financial฀covenants฀
relating฀to฀maintenance฀of฀leverage฀and฀fixed฀charge฀coverage฀
ratios.฀ The฀ Credit฀ Facility฀ also฀ contains฀ affirmative฀ and฀
negative฀covenants฀including,฀among฀other฀things,฀limitations฀
on฀certain฀additional฀indebtedness,฀guarantees฀of฀indebted-
ness,฀level฀of฀cash฀dividends,฀aggregate฀non-U.S.฀investment฀
and฀certain฀other฀transactions฀as฀defined฀in฀the฀agreement.฀
These฀covenants฀are฀substantially฀similar฀to฀those฀contained฀
in฀the฀Old฀Credit฀Facility.฀We฀were฀in฀compliance฀with฀all฀debt฀
covenants฀at฀December฀25,฀2004.
Under฀ the฀terms฀of฀the฀ Credit฀ Facility,฀we฀ may฀borrow฀
up฀to฀the฀maximum฀borrowing฀limit฀less฀outstanding฀letters฀
of฀credit.฀At฀December฀25,฀2004,฀our฀unused฀Credit฀Facility฀
totaled฀ $776฀million,฀ net฀ of฀ outstanding฀ letters฀ of฀ credit฀
of฀ $205฀million.฀ There฀ were฀ borrowings฀ of฀ $19฀million฀
outstanding฀under฀the฀Credit฀Facility฀at฀the฀end฀of฀2004.฀The฀
interest฀rate฀for฀borrowings฀under฀the฀Credit฀Facility฀ranges฀
from฀0.35%฀to฀1.625%฀over฀the฀London฀Interbank฀Offered฀Rate฀
(“LIBOR”)฀or฀0.00%฀to฀0.20%฀over฀an฀Alternate฀Base฀Rate,฀
which฀is฀the฀greater฀of฀the฀Prime฀Rate฀or฀the฀Federal฀Funds฀
Effective฀Rate฀plus฀0.50%.฀The฀exact฀spread฀over฀LIBOR฀or฀
the฀Alternate฀Base฀Rate,฀as฀applicable,฀will฀depend฀upon฀our฀
performance฀under฀specified฀financial฀criteria.฀Interest฀on฀any฀
outstanding฀borrowings฀under฀the฀Credit฀Facility฀is฀payable฀at฀
least฀quarterly.฀In฀2004,฀2003฀and฀2002,฀we฀expensed฀facility฀
fees฀of฀approximately฀$4฀million,฀$6฀million฀and฀$5฀million,฀
respectively.฀At฀December฀25,฀2004,฀the฀weighted฀average฀
contractual฀interest฀rate฀on฀borrowings฀outstanding฀under฀the฀
Credit฀Facility฀was฀2.72%.
On฀November฀15,฀2004,฀we฀voluntarily฀redeemed฀all฀of฀
our฀7.45%฀Senior฀Unsecured฀Notes฀that฀were฀due฀in฀May฀2005฀
(the฀“2005฀Notes”)฀in฀accordance฀with฀their฀original฀terms.฀
The฀2005฀Notes,฀which฀had฀a฀total฀face฀value฀of฀$350฀million,฀
were฀redeemed฀for฀approximately฀$358฀million฀using฀primarily฀
cash฀on฀hand฀as฀well฀as฀some฀borrowings฀under฀our฀Credit฀
Facility.฀The฀redemption฀amount฀approximated฀the฀carrying฀
value฀of฀the฀2005฀Notes,฀including฀a฀derivative฀instrument฀
adjustment฀under฀SFAS฀133,฀resulting฀in฀no฀significant฀impact฀
on฀net฀income฀upon฀redemption.
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