Pizza Hut 2007 Annual Report Download - page 43

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BORROWING CAPACITY On November 29,2007, the Company
executed an amended and restated five-year senior unse-
cured Revolving Credit Facility (the “Credit Facility”) totaling
$1.15 billion which replaced a five-year facility in the amount
of $1.0 billion that was set to expire on September 7, 2009.
The Credit Facility is unconditionally guaranteed by our princi-
pal domestic subsidiaries and contains financial covenants
relating to maintenance of leverage and fixed charge coverage
ratios. The Credit Facility also contains affirmative and nega-
tive covenants including, among other things, limitations on
certain additional indebtedness and liens, and certain other
transactions specified in the agreement. We were in compli-
ance with all debt covenants at December 29, 2007.
Under the terms of the Credit Facility, we may borrow up
to the maximum borrowing limit, less outstanding letters of
credit or banker’s acceptances, where applicable. At Decem-
ber 29, 2007, our unused Credit Facility totaled $971 million
net of outstanding letters of credit of $179 million. There
were no borrowings outstanding under the Credit Facility at
December 29, 2007. The interest rate for borrowings under
the Credit Facility ranges from 0.25% to 1.25% over the Lon-
don Interbank Offered Rate (“LIBOR”) or is determined by an
Alternate Base Rate, which is the greater of the Prime Rate
or the Federal Funds Rate plus 0.50%. The exact spread over
LIBOR or the Alternate Base Rate, as applicable, depends on
our performance under specified financial criteria. Interest on
any outstanding borrowings under the Credit Facility is payable
at least quarterly.
On November 29, 2007, the Company executed an
amended and restated five-year revolving credit facility (the
“International Credit Facility” or “ICF”) totaling $350 million,
which replaced a five-year facility also in the amount of $350
million that was set to expire on November 8, 2010. The ICF
is unconditionally guaranteed by YUM and by YUM’s principal
domestic subsidiaries and contains covenants substantially
identical to those of the Credit Facility. We were in compliance
with all debt covenants at the end of 2007.
There were borrowings of $28 million and available credit
of $322 million outstanding under the ICF at the end of 2007.
The interest rate for borrowings under the ICF ranges from
0.31% to 1.50% over LIBOR or is determined by a Canadian
Alternate Base Rate, which is the greater of the Citibank,
N.A., Canadian Branch’s publicly announced reference rate
or the “Canadian Dollar Offered Rate” plus 0.50%. The exact
spread over LIBOR or the Canadian Alternate Base Rate, as
applicable, depends upon YUM’s performance under specified
financial criteria. Interest on any outstanding borrowings under
the ICF is payable at least quarterly.
In 2006, we executed two short-term borrowing arrange-
ments (the “Term Loans”) on behalf of the International
Division. There were borrowings of $183 million outstanding
at the end of 2006 under the Term Loans, both of which
expired and were repaid in the first quarter of 2007.
The majority of our remaining long-term debt primarily
comprises Senior Unsecured Notes with varying maturity
dates from 2008 through 2037 and interest rates ranging
from 6.25% to 8.88%. The Senior Unsecured Notes repre-
sent senior, unsecured obligations and rank equally in right
of payment with all of our existing and future unsecured
unsubordinated indebtedness. Amounts outstanding under
Senior Unsecured Notes were $2.8 billion at December 29,
2007. This amount includes $600 million aggregate principal
amount of 6.25% Senior Unsecured Notes due March 15,
2018 and $600 million aggregate principal amount of 6.875%
Senior Unsecured Notes due November 15, 2037, both of
which were issued in October 2007. We are using the pro-
ceeds from these notes to repay outstanding borrowings on
our Credit Facility, for additional share repurchases and for
general corporate purposes.
CONTRACTUAL OBLIGATIONS In addition to any discretionary
spending we may choose to make, our significant contrac-
tual obligations and payments as of December 29, 2007
included:
Less More
than 1 –3 3–5 than
Total 1 Year Years Years 5 Years
Long-term debt
obligations(a) $ 5,034 $ 470 $ 375 $ 1,355 $ 2,834
Capital leases(b) 390 24 86 40 240
Operating leases(b) 3,886 462 798 640 1,986
Purchase obligations(c) 414 356 50 5 3
Other long-term
liabilities reflected
on our Consolidated
Balance Sheet
under GAAP 44 15 10 6 13
Total contractual
obligations $ 9,768 $ 1,327 $ 1,319 $ 2,046 $ 5,076
(a) Debt amounts include principal maturities and expected interest payments. Rates
utilized to determine interest payments for variable rate debt are based on an
estimate of future interest rates. Excludes a fair value adjustment of $17 million
included in debt related to interest rate swaps that hedge the fair value of a por-
tion of our debt. See Note 13.
(b) These obligations, which are shown on a nominal basis, relate to 6,000 restau-
rants. See Note 14.
(c) Purchase obligations include agreements to purchase goods or services that are
enforceable and legally binding on us and that specify all significant terms, includ-
ing: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. We have excluded agree-
ments that are cancelable without penalty. Purchase obligations relate primarily to
information technology, marketing, commodity agreements, purchases of property,
plant and equipment as well as consulting, maintenance and other agreements.
We have not included in the contractual obligations table
approximately $319 million for long-term liabilities for unrec-
ognized tax benefits for various tax positions we have taken.
These liabilities may increase or decrease over time as a
result of tax examinations, and given the status of the exami-
nations, we cannot reliably estimate the period of any cash
settlement with the respective taxing authorities. These liabili-
ties also include amounts that are temporary in nature and for
which we anticipate that over time there will be no net cash
outflow. We have included in the contractual obligations table
$9 million in liabilities for unrecognized tax benefits that we
expect to settle in cash in the next year.