Pizza Hut 2011 Annual Report Download - page 145

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(“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.
We also have a $350 million, syndicated international revolving credit facility (the “ICF”) which matures in November 2012 and
includes six banks with commitments ranging from $35 million to $90 million. We believe the syndication reduces our dependency
on any one bank. There was available credit of $350 million and no borrowings outstanding under the ICF at the end of 2011. 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.
The Credit Facility and the ICF are unconditionally guaranteed by our principal domestic subsidiaries. Additionally, the ICF is
unconditionally guaranteed by YUM. These agreements contain financial covenants relating to maintenance of leverage and fixed
charge coverage ratios and also contain affirmative and negative covenants including, among other things, limitations on certain
additional indebtedness and liens, and certain other transactions specified in the agreement. Given the Company’s strong balance
sheet and cash flows we were able to comply with all debt covenant requirements at December 31, 2011 with a considerable
amount of cushion.
We are in the process of renewing these facilities.
Our remaining long-term debt primarily comprises Senior Unsecured Notes with varying maturity dates from 2012 through 2037
and interest rates ranging from 2.38% to 7.70%. The Senior Unsecured Notes represent 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 $3.0 billion at December 31, 2011 including $263 million in Senior Unsecured Notes due in
July 2012.
Both the Credit Facility and the ICF contain cross-default provisions whereby our failure to make any payment on any of our
indebtedness in a principal amount in excess of $100 million, or the acceleration of the maturity of any such indebtedness, will
constitute a default under such agreement. Our Senior Unsecured Notes provide that the acceleration of the maturity of any of our
indebtedness in a principal amount in excess of $50 million will constitute a default under the Senior Unsecured Notes if such
acceleration is not annulled, or such indebtedness is not discharged, within 30 days after notice.
Contractual Obligations
In addition to any discretionary spending we may choose to make, our significant contractual obligations and payments as of
December 31, 2011 included:
Long-term debt obligations(a)
Capital leases(b)
Operating leases(b)
Purchase obligations(c)
Other(d)
Total contractual obligations
Total
$ 4,774
437
5,337
797
72
$ 11,417
Less than 1
Year
$ 414
65
612
695
37
$ 1,823
1-3 Years
$ 339
53
1,116
77
16
$ 1,601
3-5 Years
$ 814
52
956
16
7
$ 1,845
More than 5
Years
$ 3,207
267
2,653
9
12
$ 6,148
(a) Debt amounts include principal maturities and expected interest payments. Rates utilized to determine interest payments
for variable rate debt are based on the LIBOR forward yield curve. Excludes a fair value adjustment of $26 million
included in debt related to interest rate swaps that hedge the fair value of a portion of our debt. See Note 10.
(b) These obligations, which are shown on a nominal basis, relate to nearly 6,200 restaurants. See Note 11.
Form 10-K