Papa Johns 2003 Annual Report Download - page 56

55
7. Debt and Credit Arrangements (continued)
In connection with the authorization of a common stock share repurchase program in 1999 (see Note 16),
we entered into a $200.0 million revolving line of credit facility which terminated in January 2003. In
January 2003, we entered into an agreement to extend our revolving line of credit facility. The line of
credit allows us to borrow up to $175.0 million with an expiration date in January 2006. Outstanding
balances accrue interest at 62.5 to 100.0 basis points over LIBOR or other bank developed rates at our
option. The commitment fee on the unused balance ranges from 15.0 to 20.0 basis points. The increment
over LIBOR and the commitment fee are determined quarterly based upon the ratio of total indebtedness
to EBITDA. The outstanding balance under each line of credit was $61.0 million at December 28, 2003
and $139.6 million at December 29, 2002. The fair value of our outstanding debt approximates the
carrying value.
The line of credit contains customary affirmative and negative covenants, including financial covenants
requiring the maintenance of specified fixed charge and leverage ratios and minimum levels of net worth.
At December 28, 2003, we were in compliance with these covenants.
In March 2000, Papa John’s entered into a no-fee interest rate collar (“Collar”) with a notional amount of
$100.0 million, a 30-day LIBOR rate range of 6.36% (floor) to 9.50% (ceiling) which expired in March,
2003. The purpose of the Collar was to provide a hedge against the effects of rising interest rates. Papa
John’s made payments under the terms of the Collar when the 30-day LIBOR rate was below the floor to
raise the effective rate to 6.36%, and received payments when the 30-day LIBOR rate was above the
ceiling, to lower the effective rate to 9.50%, thus assuring that Papa John’s effective 30-day LIBOR rate
was always within the above-stated range. When the 30-day LIBOR rate was within the range, no
payments were made or received under the Collar. Amounts payable or receivable under the Collar were
accounted for as adjustments to interest expense.
In November 2001, we entered into an interest rate swap agreement (“Swap”) that provides for a fixed
rate of 5.31%, as compared to LIBOR, on $100.0 million of floating rate debt from March 2003 to March
2004, reducing to a notional value of $80.0 million from March 2004 to March 2005, and reducing to a
notional value of $60.0 million in March 2005 with an expiration date of March 2006. The purpose of the
Swap is to provide a hedge against the effects of rising interest rates on forecasted future borrowings.
The net fair value of the Swap was a liability balance of $5.3 million ($3.3 million, net of tax) at
December 28, 2003. The combined net fair value of the Collar and Swap was a liability balance of $8.1
million ($5.0 million, net of tax) at December 29, 2002. The liabilities are included in other long-term
liabilities in the accompanying consolidated balance sheets (offset by corresponding amounts in
stockholders’ equity, representing the net unrealized losses included in accumulated other comprehensive
loss), except as noted below.
Amounts payable or receivable under the Swap were accounted for as adjustments to interest expense.
Additionally, the portion of the net fair value of the Swap deemed to be unhedged as of December 28,
2003 was also accounted for as an adjustment to interest expense in the amount of $175,000.
Interest paid during fiscal 2003, 2002 and 2001 was $6.9 million, $7.5 million, and $9.4 million,
respectively.