Pizza Hut 2015 Annual Report Download - page 158

YUM! BRANDS, INC.-2015 Form10-K50
Form 10-K
PART II
ITEM 8Financial Statements and Supplementary Data
NOTE10 Short-term Borrowings and Long-term Debt
2015 2014
Short-term Borrowings
Current maturities of long-term debt $ 313 $ 264
Current portion of fair value hedge accounting adjustment 1 3
Unsecured Short-Term Loan Credit Facility, expires June 2016 600 —
Other 9 —
$ 923 $ 267
Long-term Debt
Senior Unsecured Notes $ 2,497 $ 2,746
Unsecured Revolving Credit Facility, expires March 2017 701 416
Capital lease obligations (See Note 11) 169 175
3,367 3,337
Less current maturities of long-term debt (313) (264)
Long-term debt excluding long-term portion of hedge accounting adjustment 3,054 3,073
Long-term portion of fair value hedge accounting adjustment — 4
Long-term debt including hedge accounting adjustment $ 3,054 $ 3,077
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 26, 2015, our unused Credit Facility totaled $594 million net of
outstanding letters of credit of $5 million. There were borrowings of $701million
and $416 million outstanding under the Credit Facility at December 26, 2015
and December27, 2014, respectively. 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 Short-Term
Loan Credit Facility depends upon our performance against specified financial
criteria. Interest on any outstanding borrowings under the Credit Facility is
payable at least quarterly.
On December 8, 2015, we executed a credit agreement providing for an
unsecured term loan facility (the “Short-Term Loan Credit Facility”) in an amount
up to $1.5 billion which matures in June 2016 with an option for us to extend
maturity for an additional three months and includes three participating banks.
Under the terms of the Short-Term Loan Credit Facility, we may borrow up to
the full amount of the facility in up to three draws. At December 26, 2015, our
unused Short-Term Loan Credit Facility totaled $900 million net of outstanding
borrowings of $600 million. The interest rate for most borrowings under the
Short-Term Loan Credit Facility ranges from 1.00% to 1.75% over LIBOR.
The exact spread over LIBOR under the Short-Term Loan Credit Facility
depends upon our performance against specified financial criteria. Interest
on any outstanding borrowings under the Short-Term Loan Credit Facility is
payable at least quarterly.
Both the Credit Facility and the Short-Term Loan Credit Facility are unconditionally
guaranteed by our principal domestic subsidiaries and contain financial covenants
relating to the maintenance of leverage and fixed charge coverage ratios. The
agreements for both facilities 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 26, 2015 with a considerable
amount of cushion. Additionally, both facilities contain 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 2016 through 2043 and
stated interest rates ranging from 3.75% 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 contain cross-default provisions whereby 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 unless such indebtedness is discharged, or the acceleration of the
maturity of that indebtedness is annulled, within 30 days after notice.
During the fourth quarter of 2015, we repaid $250 million of Senior Unsecured
Notes upon their maturity.
The following table summarizes all Senior Unsecured Notes issued that remain outstanding at December 26, 2015:
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 2019 $ 250 5.30% 5.59%
August 2010 November 2020 $ 350 3.88% 4.01%
August 2011 November 2021 $ 350 3.75% 3.88%
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.