Papa Johns 2008 Annual Report Download - page 60

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53
Minority interests and other general expenses reflected net expense of $7.9 million in 2007, as compared
to $4.4 million in 2006 as detailed below (in thousands):
Increase
2007 2006 (Decrease)
Minority interests income 1,268$ 1,647$ (379)$
Disposition and valuation-related costs of other assets 2,981 1,699 1,282
Restaurant impairment and closure reserves 1,807 (260) 2,067
Provision for uncollectible accounts and notes receivable 218 908 (690)
Pre-opening costs 371 467 (96)
Contribution to Marketing Fund 1,000 - 1,000
Other 294 (52) 346
Total minority interests and other general expenses 7,939$ 4,409$ 3,530$
Depreciation and amortization was $31.9 million (3.0% of revenues) for 2007, as compared to $27.2
million (2.7% of revenues) for 2006. The primary reason for the increase in depreciation and
amortization in 2007, as compared to 2006, is due to the acquisition of 118 domestic franchised
restaurants during 2006 and 2007.
Net interest. Net interest expense was $6.0 million in 2007, compared to $1.8 million in 2006. The
interest expense for 2007 and 2006 includes approximately $500,000 and $600,000, respectively, related
to BIBP’s debt with a third-party bank. The increase in our 2007 net interest expense reflected a higher
average outstanding debt balance resulting from share repurchase activity under our share repurchase
program and franchise restaurant acquisitions in 2007.
Income Tax Expense. We recognized reductions of $3.4 million and $2.5 million in our customary
income tax expense associated with the finalization of certain income tax issues in 2007 and 2006,
respectively. Our effective income tax rate was 28.9% in 2007 compared to 34.5% in 2006.
Liquidity and Capital Resources
Our debt is comprised of the following (in thousands) at year-end:
2008 2007
Revolving line of credit 123,500$ 134,000$
Debt associated with VIEs * 7,075 8,700
Other 79 6
Total debt 130,654 142,706
Less: current portion of debt (7,075) (8,700)
Long-term debt 123,579$ 134,006$
* During 2008, Papa John's entered into an agreement to guarantee BIBP's outstanding debt.
The revolving line of credit allows us to borrow up to $175.0 million with an expiration date of January
2011. Outstanding balances accrue interest at 50.0 to 100.0 basis points over the London Interbank
Offered Rate (“LIBOR”) or other bank developed rates at our option. The commitment fee on the unused
balance ranges from 12.5 to 20.0 basis points. The increment over LIBOR and the commitment fee are
determined quarterly based upon the ratio of total indebtedness to earnings before interest, taxes,
depreciation and amortization (“EBITDA”), as defined in the line of credit.