Pizza Hut 2014 Annual Report Download - page 124

13MAR201517272138
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
During the year ended December 27, 2014 we repurchased shares for rate for borrowings under the Credit Facility ranges from 1.0% to
$820 million. On November 22, 2013, our Board of Directors 1.75% over the ‘‘London Interbank Offered Rate’’ (‘‘LIBOR’’). The
authorized share repurchases through May 2015 of up to $750 million exact spread over LIBOR under the Credit Facility depends upon our
(excluding applicable transaction fees) of our outstanding Common performance against specified financial criteria. Interest on any
Stock. On November 20, 2014, our Board of Directors authorized outstanding borrowings under the Credit Facility is payable at least
additional share repurchases through May 31, 2016 of up to $1 billion quarterly.
(excluding applicable transaction fees) of our outstanding Common The Credit Facility is unconditionally guaranteed by our principal
Stock. At December 27, 2014, we had remaining capacity to domestic subsidiaries and contains financial covenants relating to
repurchase up to $1.1 billion of outstanding Common Stock (excluding maintenance of leverage and fixed-charge coverage ratios and also
applicable transaction fees) under these authorizations. Shares are contains affirmative and negative covenants including, among other
repurchased opportunistically as part of our regular capital structure things, limitations on certain additional indebtedness and liens, and
decisions. certain other transactions specified in the agreement. Given the
During the year ended December 27, 2014, we paid cash dividends of Company’s strong balance sheet and cash flows we were able to
$669 million. Additionally, on November 20, 2014 our Board of comply with all debt covenant requirements at December 27, 2014
Directors approved cash dividends of $0.41 per share of Common with a considerable amount of cushion. Additionally, the Credit Facility
Stock that were distributed on February 6, 2015 to shareholders of contains cross-default provisions whereby our failure to make any
record at the close of business on January 16, 2015. The Company payment on our indebtedness in a principal amount in excess of
targets an ongoing annual dividend payout ratio of 40% to 45% of net $125 million, or the acceleration of the maturity of any such
income. 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 2015
Borrowing Capacity through 2043 and stated interest rates ranging from 3.75% to 6.88%.
Our primary bank credit agreement comprises a $1.3 billion The notes represent senior, unsecured obligations and rank equally in
syndicated senior unsecured revolving credit facility (the ‘‘Credit right of payment with all of our existing and future unsecured
Facility’’) which matures in March 2017 and includes 24 participating unsubordinated indebtedness. Amounts outstanding under Senior
banks with commitments ranging from $23 million to $115 million. We Unsecured Notes were $2.8 billion at December 27, 2014. Our Senior
believe the syndication reduces our dependency on any one bank. Unsecured Notes provide that the acceleration of the maturity of any
of our indebtedness in a principal amount in excess of $50 million will
Under the terms of the Credit Facility, we may borrow up to the constitute a default under the Senior Unsecured Notes unless such
maximum borrowing limit, less outstanding letters of credit or banker’s indebtedness is discharged, or the acceleration of the maturity of that
acceptances, where applicable. At December 27, 2014, our unused indebtedness is annulled, within 30 days after notice.
Credit Facility totaled $824 million net of outstanding letters of credit of
$60 million and outstanding borrowings of $416 million. The interest
Contractual Obligations
Our significant contractual obligations and payments as of December 27, 2014 included:
More than 5
Total Less than 1 Year 1-3 Years 3-5 Years Years
Long-term debt obligations(a) $ 4,561 $ 395 $ 953 $ 754 $ 2,459
Capital leases(b) 282 20 41 40 181
Operating leases(b) 5,479 709 1,270 1,056 2,444
Purchase obligations(c) 781 587 103 69 22
Benefit plans(d) 179 38 38 34 69
Total contractual obligations $ 11,282 $ 1,749 $ 2,405 $ 1,953 $ 5,175
(a) Debt amounts include principal maturities and expected interest payments on a nominal basis. Debt amounts exclude a fair value adjustment of $7 million 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 primarily to approximately 7,775 company-owned restaurants. See Note 11.
(c) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms,
including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have
excluded agreements that are cancelable without penalty. Purchase obligations relate primarily to supply agreements, marketing, information technology,
purchases of property, plant and equipment (‘‘PP&E’’) as well as consulting, maintenance and other agreements.
(d) Includes actuarially determined timing of payments from our most significant unfunded pension plan as well as scheduled payments from our deferred
compensation plan. This table excludes $129 million of future benefit payments for deferred compensation and other unfunded benefit plans to be paid upon
separation of employee’s service or retirement from the company, as we cannot reasonably estimate the dates of these future cash payments.
We sponsor noncontributory defined benefit pension plans covering required to comply with the Pension Protection Act of 2006. However,
certain salaried and hourly employees, the most significant of which additional voluntary contributions are made from time to time to
are in the U.S. and UK. The most significant of the U.S. plans, the improve the Plan’s funded status. At December 27, 2014 the Plan was
YUM Retirement Plan (the ‘‘Plan’’), is funded while benefits from our in a net underfunded position of $191 million. The UK pension plans
other significant U.S. plan are paid by the Company as incurred (see were in a net overfunded position of $57 million at our 2014
footnote (d) above). Our funding policy for the Plan is to contribute measurement date.
annually amounts that will at least equal the minimum amounts
30 YUM! BRANDS, INC. - 2014 Form 10-K
Form 10-K