Pizza Hut 2002 Annual Report Download - page 42

In 2001, net cash provided by operating activities was $832
million compared to $491 million in 2000. Excluding the impact
of the AmeriServe bankruptcy reorganization process, cash pro-
vided by operating activities was $704 million versus $734 million
in 2000.
Net cash used in investing activities was $885 million ver-
sus $503 million in 2001. The increase in cash used was primarily
due to the acquisition of YGR and higher capital spending in 2002,
partially offset by the acquisition of fewer restaurants from fran-
chisees in 2002.
In 2001, net cash used in investing activities was $503 million
versus $237 million in 2000. The increase in cash used was pri-
marily due to lower gross refranchising proceeds as a result of
selling fewer restaurants in 2001 and increased acquisitions of
restaurants from franchisees and capital spending. The increase
was partially offset by lapping the funding of a debtor-in-posses-
sion revolving credit facility to AmeriServe in 2000.
Although we report gross proceeds in our Consolidated
Statements of Cash Flows, we also consider refranchising proceeds
on an “after-tax” basis. We define after-tax proceeds as gross
refranchising proceeds less the settlement of working capital lia-
bilities (primarily accounts payable and property taxes) related to
the units refranchised and payment of taxes on the gains. The
after-tax proceeds can be used to pay down debt or repurchase
shares. After-tax proceeds were approximately $71 million in 2002
which reflects a 21% decrease from 2001. This decrease was due
to the refranchising of fewer restaurants in 2002 versus 2001.
Net cash used in financing activities was $187 million ver-
sus $352 million in 2001. The decrease is primarily due to lower
debt repayments and higher proceeds from stock option exercises
versus 2001, partially offset by higher shares repurchased in 2002.
In 2001, net cash used in financing activities was $352 million
compared to $207 million in 2000. The increase in cash used is
primarily due to higher repayment of debt, partially offset by fewer
shares repurchased in 2001 compared to 2000.
In November 2002, our Board of Directors authorized a new
share repurchase program. This program authorizes us to repur-
chase, through November 20, 2004, up to $300 million of our
outstanding Common Stock (excluding applicable transaction
fees). During 2002, we repurchased approximately 1.2 million
shares for approximately $28 million under this program.
In February 2001, our Board of Directors authorized a share
repurchase program. This program authorized us to repurchase
up to $300 million of our outstanding Common Stock (excluding
applicable transaction fees). This share repurchase program was
completed in 2002. During 2002, we repurchased approximately
7.0 million shares for approximately $200 million under this pro-
gram. During 2001, we repurchased approximately 4.8 million
shares for approximately $100 million.
40.
In September 1999, our Board of Directors authorized a share
repurchase program. This program authorized us to repurchase
up to $350 million of our outstanding Common Stock (excluding
applicable transaction fees). This share repurchase program was
completed in 2000. During 2000, we repurchased approximately
12.8 million shares for approximately $216 million.
See Note 21 for a discussion of the share repurchase programs.
FINANCING ACTIVITIES
On June 25, 2002, we closed on a new $1.4 billion senior unse-
cured Revolving Credit Facility (the “New Credit Facility”). The New
Credit Facility replaced the existing bank credit agreement which
was comprised of a senior unsecured Term Loan Facility and a
$1.75 billion senior unsecured Revolving Credit Facility (collectively
referred to as the “Old Credit Facilities”) that were scheduled to
mature on October 2, 2002. On December 27, 2002, we volun-
tarily reduced our maximum borrowings under the New Credit
Facility from $1.4 billion to $1.2 billion. The New Credit Facility
matures on June 25, 2005. We used the initial borrowings under
the New Credit Facility to repay the indebtedness under the Old
Credit Facilities.
The New Credit Facility is unconditionally guaranteed by our
principal domestic subsidiaries and contains other terms and
provisions (including representations, warranties, covenants, con-
ditions and events of default) similar to those set forth in the Old
Credit Facilities. Specifically, the New Credit Facility contains finan-
cial covenants relating to maintenance of leverage and fixed
charge coverage ratios. The New Credit Facility also contains affir-
mative and negative covenants including, among other things,
limitations on certain additional indebtedness, guarantees of
indebtedness, cash dividends, aggregate non-U.S. investment and
certain other transactions as defined in the agreement.
Under the terms of the New Credit Facility, we may borrow up
to the maximum borrowing limit less outstanding letters of credit.
At December 28, 2002, our unused New Credit Facility totaled
$0.9 billion, net of outstanding letters of credit of $0.2 billion. The
interest rate for borrowings under the New Credit Facility ranges
from 1.00% to 2.00% over the London Interbank Offered Rate
(“LIBOR”) or 0.00% to 0.65% over an Alternate Base Rate, which is
the greater of the Prime Rate or the Federal Funds Effective Rate
plus 1%. The exact spread over LIBOR or the Alternate Base Rate,
as applicable, will depend upon our performance under specified
financial criteria. Interest is payable at least quarterly. In the third
quarter of 2002, we capitalized debt issuance costs of approxi-
mately $9 million related to the New Credit Facility. These debt
issuance costs will be amortized into interest expense over the life
of the New Credit Facility.
In June 2002, we issued $400 million of 7.70% Senior Unse-
cured Notes due July 1, 2012 (the “2012 Notes”). The net proceeds