Papa Johns 2008 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2008 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

81
7. Restaurant Closure, Impairment and Dispositions (continued)
(4) We identified 14 under-performing restaurants located in one market that were subject to
impairment charges due to the restaurants’ declining performance during 2008, which was a
result of increased competition, increased operating expenses and deteriorating economic
conditions in that market. During our review of potentially impaired restaurants, we considered
several indicators, including restaurant profitability, annual comparable sales, operating trends
and actual operating results at a market level. In accordance with SFAS No. 144, we estimated
the undiscounted cash flows over the estimated lives of the assets for each of our restaurants that
met certain impairment indicators and compared those estimates to the carrying values of the
underlying assets. The forecasted cash flows were based on our assessment of the individual
restaurant’s future profitability, which is based on the restaurant’s historical financial
performance, the maturing of the restaurant’s market, as well as our future operating plans for the
restaurant and its market. In estimating fair market value based on future cash flows, we used a
discount rate of 10.5%, which approximated the return we expected on those types of
investments. Based on our analysis, we determined that 14 restaurants were impaired for a total
of $743,000.
(5) At December 28, 2008, we had a net investment of approximately $15.7 million associated with
our United Kingdom subsidiary (PJUK), excluding the $3.5 million loan due from the purchaser
of Perfect Pizza. During 2008, we recorded a goodwill impairment charge of $2.3 million
associated with our PJUK operations.
8. Debt and Credit Arrangements
Debt and credit arrangements consist of the following (in thousands):
2008 2007
Revolving line of credit 123,500$ 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.
In January 2006, we executed a five-year, unsecured Revolving Credit Facility ("Credit Facility”)
totaling $175.0 million. Under the New Credit Facility, 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. The
remaining availability under our line of credit, reduced for certain outstanding letters of credit,
approximated $31.1 million and $20.6 million as of December 28, 2008 and December 30, 2007,
respectively. The fair value of our outstanding debt approximates the carrying value since our debt
agreements are variable-rate instruments.