Pizza Hut 2003 Annual Report Download - page 64

62.
ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
note
13
2003 2002
Accounts payable $ 439 $ 417
Accrued compensation and benefits 257 258
Other current liabilities 517 491
$ 1,213 $ 1,166
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
note
14
2003 2002
Short-term Borrowings
Current maturities of long-term debt $ 10 $ 12
International lines of credit — 115
Other — 19
$ 10 $ 146
Long-term Debt
Senior, unsecured Revolving Credit Facility,
expires June 2005 $ — $ 153
Senior, Unsecured Notes, due May 2005 351 351
Senior, Unsecured Notes, due April 2006 200 200
Senior, Unsecured Notes, due May 2008 251 251
Senior, Unsecured Notes, due April 2011 645 645
Senior, Unsecured Notes, due July 2012 398 398
Capital lease obligations (See Note 15) 112 99
Other, due through 2010 (6% – 12%) 80 170
2,037 2,267
Less current maturities of long-term debt (10) (12)
Long-term debt excluding SFAS 133 adjustment 2,027 2,255
Derivative instrument adjustment under
SFAS 133 (See Note 16) 29 44
Long-term debt including SFAS 133 adjustment $ 2,056 $ 2,299
Our primary bank credit agreement comprises a senior
unsecured Revolving Credit Facility (the “Credit Facility”)
which matures on June 25, 2005. On December 26, 2003,
we voluntarily reduced our maximum borrowings under the
Credit Facility from $1.2 billion to $1.0 billion. The Credit
Facility is unconditionally guaranteed by our principal
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, limi-
tations on certain additional indebtedness, guarantees of
indebtedness, level of cash dividends, aggregate non-U.S.
investment and certain other transactions as defined in the
agreement. We were in compliance with all debt covenants
at December 27, 2003.
Under the terms of the Credit Facility, we may borrow
up to the maximum borrowing limit less outstanding letters
of credit. At December 27, 2003, our unused Credit Facility
totaled $737 million, net of outstanding letters of credit of
$263 million. There were no borrowings outstanding under
the Credit Facility at the end of the year. The interest rate
for borrowings under the Credit Facility ranges from 1.0%
to 2.0% 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 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 2003, 2002 and 2001, we
expensed facility fees of approximately $6 million, $5 million
and $4 million, respectively. At December 28, 2002, the
weighted average contractual interest rate on borrowings
outstanding under the Credit Facility was 2.6%.
In 1997, we filed a shelf registration statement with
the Securities and Exchange Commission for offerings of
up to $2 billion of senior unsecured debt. In June 2002, we
issued $400 million of 7.70% Senior Unsecured Notes due
July 1, 2012 (the “2012 Notes”). The net proceeds from the
issuance of the 2012 Notes were used to repay indebted-
ness under the Credit Facility. Additionally, we capitalized
debt issuance costs of approximately $5 million related to
the 2012 Notes in the third quarter of 2002. The following
table summarizes all Senior Unsecured Notes issued under
this shelf registration through December 27, 2003:
Principal Interest Rate
Issuance Date Maturity Date Amount Stated Effective.(d)
May 1998 May 2005(a) $ 350 7.45% 7.62%
May 1998 May 2008(a) 250 7.65% 7.81%
April 2001 April 2006(b) 200 8.50% 9.04%
April 2001 April 2011(b) 650 8.88% 9.20%
June 2002 July 2012(c) 400 7.70% 8.04%
(a) Interest payments commenced on November 15, 1998 and are payable semi-
annually thereafter.
(b) Interest payments commenced on October 15, 2001 and are payable semi-
annually thereafter.
(c) Interest payments commenced on January 1, 2003 and are payable semi-
annually thereafter.
(d) Includes the effects of the amortization of any (1) premium or discount; (2) debt
issuance costs; and (3) gain or loss upon settlement of related treasury locks.
Does not include the effect of any interest rate swaps as described in Note 16.
We have $150 million remaining for issuance under the
$2 billion shelf registration.
In connection with our acquisition of YGR in 2002,
we assumed approximately $168 million in present value
of future rent obligations related to three existing sale-
leaseback agreements entered into by YGR involving
approximately 350 LJS units. As a result of liens held by
the buyer/lessor on certain personal property within the
units, the sale-leaseback agreements were accounted
for as financings upon acquisition. On August 15, 2003,
we amended two of these sale-leaseback agreements to
remove the liens on the personal property within the units.
As the two amended agreements now qualify for sale-lease-
back accounting, they will be accounted for as operating
leases. Accordingly, the future rent obligations associated
with the two amended agreements, previously recorded
as long-term debt of $88 million, are no longer reflected
on our Consolidated Balance Sheet as of December 27,
2003. There was no gain or loss recorded as a result of
this transaction.