Pizza Hut 2013 Annual Report Download - page 150

YUM! BRANDS, INC.-2013 Form10-K54
Form 10-K
PART II
ITEM 8Financial Statements andSupplementaryData
NOTE10 Short-term Borrowings and Long-term Debt
2013 2012
Short-term Borrowings
Current maturities of long-term debt $ 71 $ 10
Long-term Debt
Senior Unsecured Notes $ 2,803 $ 2,750
Capital lease obligations (See Note 11) 172 170
2,975 2,920
Less current maturities of long-term debt (71) (10)
Long-term debt excluding long-term portion of hedge accounting adjustment 2,904 2,910
Long-term portion of fair value hedge accounting adjustment (See Note 12) 14 22
LONG-TERM DEBT INCLUDING HEDGE ACCOUNTING ADJUSTMENT $ 2,918 $ 2,932
Our primary bank credit agreement comprises a $1.3 billion syndicated
senior unsecured revolving credit facility (the “Credit Facility”) which matures
in March 2017. The Credit Facility includes 24 participating banks with
commitments ranging from $23 million to $115 million. 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 December 28, 2013, our unused Credit Facility totaled $1.2 billion net
of outstanding letters of credit of $65 million. There were no borrowings
outstanding under the Credit Facility at December 28, 2013. The interest
rate for most borrowings under the Credit Facility ranges from 1.00%
to 1.75% over the London Interbank Offered Rate (“LIBOR”). The exact
spread over LIBOR under the Credit Facility depends upon our performance
against specified financial criteria. Interest on any outstanding borrowings
under the Credit Facility is payable at least quarterly.
The Credit Facility is unconditionally guaranteed by our principal domestic
subsidiaries. This agreement contains financial covenants relating to
maintenance of leverage and fixed charge coverage ratios and also contains
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 28, 2013 with a considerable amount of cushion� Additionally,
the Credit Facility contains cross-default provisions whereby our failure to
make any payment on our indebtedness in a principal amount in excess of
$125 million, or the acceleration of the maturity of any such indebtedness,
will constitute a default under such agreement�
The majority of our remaining long-term debt primarily comprises Senior
Unsecured Notes with varying maturity dates from 2014 through 2043 and
stated interest rates ranging from 2�38% to 6�88%� 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� 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�
During the fourth quarter of 2013, we issued $325 million aggregate principal
amount of 3�88% 10 year Senior Unsecured Notes and $275 million
aggregate principal amount of 5�35% 30 year Senior Unsecured Notes� We
used the proceeds from our issuances of these Senior Unsecured Notes
in part to repurchase $550 million of our Senior Unsecured Notes due
either March 2018 or November 2037 with aggregate principal amounts
of $275 million each� See Losses Related to the Extinguishment of Debt
section of Note 4 for further detail�
The following table summarizes all Senior Unsecured Notes issued that remain outstanding at December 28, 2013:
Issuance Date(a) Maturity Date
Principal Amount
(in millions)
Interest Rate
Stated Effective(b)
April 2006 April 2016 $ 300 6�25% 6�03%
October 2007 March 2018 $ 325 6�25% 6�36%
October 2007 November 2037 $ 325 6�88% 7�45%
August 2009 September 2015 $ 250 4�25% 4�44%
August 2009 September 2019 $ 250 5�30% 5�59%
August 2010 November 2020 $ 350 3�88% 4�01%
August 2011 November 2021 $ 350 3�75% 3�88%
September 2011 September 2014 $ 58 2�38% 2�89%
October 2013 November 2023 $ 325 3�88% 4�01%
October 2013 November 2043 $ 275 5�35% 5�42%
(a) Interest payments commenced approximately six months after issuance date and are payable semi-annually thereafter.
(b) 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 and forward-starting interest
rate swaps utilized to hedge the interest rate risk prior to the debt issuance. Excludes the effect of any swaps that remain outstanding as described in Note 12.